Fund Our Future: Policy brief outlines path to a thriving Hawaiʻi through fair tax reform
HONOLULU, Hawaiʻi — Today, the Hawaiʻi Appleseed Center for Law and Economic Justice released a comprehensive policy brief, “A Fairer Tax Code for a Thriving Hawaiʻi: Progressive Revenue Options to Protect and Invest in Our Future,” detailing the urgent fiscal crossroads facing the state and presenting a roadmap to raise essential revenue by asking the wealthy and corporations to pay their fair share.
The brief outlines how two simultaneous budget shocks—the state’s Act 46 income tax cuts and impending federal budget cuts from H.R.1—disproportionately benefit high-income households while threatening to cripple public services.
Act 46 will cost the state over $1.4 billion annually by 2032, with the top 1 percent of earners receiving an average annual tax break of $12,802. Meanwhile, the lowest-income 20 percent will see an average cut of just $469.
H.R.1, meanwhile, provides significant tax cuts to high income households at the expense of federal funding for programs like Medicaid (serving 401,000 residents) and SNAP (serving 162,000 residents).
“We are at a defining moment,” said Will White, Hawaiʻi Appleseed Executive Director. “We can allow over a billion dollars a year to flow away from our schools, housing, and healthcare, largely into the pockets of the wealthiest few. Or, we can choose to build a thriving Hawaiʻi by making our tax system fair. The math is clear, and the moral choice is clearer.”
Key Findings from the Brief
Regressive System: Hawaiʻi’s tax system already asks more from low-income families than from the wealthy. Act 46 worsens this inequality.
Cost of Inaction: Combined, Act 46 and federal cuts will create massive budget shortfalls, forcing devastating cuts to essential programs.
Fixing Act 46: It is possible to rebalance Act 46 so that it continues to provide relief to working families while scaling back tax cuts for the rich.
Funding Our Future: The brief details over $400 million in annual revenue options to invest in Hawaiʻi’s communities that target extreme wealth and corporate loopholes, insulating working families.
Primary Recommendations
Freeze Act 46: Immediately halt the costly expansion of high-income tax brackets, while keeping the increased standard deduction that benefits low- and middle-income families. This single action would save the state $296 million annually.
Enact Progressive Revenue Policies: The brief proposes six targeted measures, including:
Closing the Capital Gains Loophole: Tax investment income at the same rate as wages, raising $44-85 million/year.
Increasing Top Income Tax Rates: Modestly adjust rates for the top 5 brackets, with 86% of the burden falling on the top 1% of earners, raising $69 million/year.
Taxing Real Estate Investment Trusts (REITs): Ensure large, often out-of-state owners of revenue-generating property like Ala Moana Center contribute, raising $60 million+/year.
Restructuring the Conveyance Tax: Lower taxes for middle-class home sales while raising them on luxury and investment properties, raising $68.5 million/year.
Implement a Wealth Proceeds Tax: Apply a tax to investment income (like capital gains and dividends) over $200,000 for individuals, raising $53.9 million/year.
Adopt a Millionaire’s Tax: Add a surcharge on annual income over $1 million, raising $35-71 million/year.
“Imagine a Hawaiʻi in which all our keiki learn in the very best schools; in which our kūpuna live in dignity, our families have stable homes, and our communities are resilient against any challenge. This vision is within reach, but it requires all of us to contribute,” added White. “It means asking those who have benefited most from our system—those with the most wealth—to pay a modest, fair share more.
“This is not a punishment; it is an investment in our common future. Let’s choose the path where we all do better together, where our collective tax dollars build a Hawaiʻi that lifts every single one of us.”
