Hawaii residents could have thousands of dollars shaved off their tax bill over several years if their governor signs wide-ranging tax reform legislation into law.
A significant cut to Hawaii’s income tax is likely on the way if Governor Josh Green signs a unanimously approved state budget for 2025. The budget includes House Bill 2404, which would gradually reduce the state income tax burden on Hawaii residents over several years. Honolulu Civil Beat estimated it could save median-income residents about $20,000 over the next seven years.
The new tax system operates by gradually reducing the base tax and excess percentage charges for every income range. An individual earning between $54,000 and $72,000 would have a tax imposed at $3,398 plus 7.9 percent of any income earned over $54,000. However, beginning in 2025, the base tax for this income tier would decrease by almost $900 to $2,513 plus 7.2 percent of any additional income above $54,000.
The tax reform would also gradually eliminate state income taxes for joint filers earning less than $19,200 in a series of incremental increases. By the year 2031, this would extend to joint filers earning up to $38,400, effectively eliminating state income taxes for them as well.
A stock image of $100 bills. A new income tax bill, if signed, could save Hawaii residents thousands of dollars over several years. A stock image of $100 bills. A new income tax bill, if signed, could save Hawaii residents thousands of dollars over several years. GETTY
The top state income tax rate would remain at 11 percent under the bill, but beginning in 2025, the 11 percent tax rate would only apply to joint filers who earned more than $650,000, compared to couples earning more than $400,000 currently.
According to Hawaii’s Department of Taxation, the state has the second-highest income tax burden across all income levels in all 50 U.S. states, outranked only by Oregon.
The bill and wider state budget have not yet been signed into law. Newsweek has contacted Green for comment via a contact form on his website outside normal working hours.
Despite passing unanimously in the state’s House of Representatives, some lawmakers have expressed concerns over what the tax cut may mean for Hawaii’s finances.
“Cutting taxes, there’s a price to pay for it,” Democratic Senate Majority Leader Gary Hooser said, Honolulu Civil Beat reported. “Services have to get cut, or you don’t spend money on education, or park preservation, or any number of services—mental health, affordable housing. I mean, the money doesn’t come out of nowhere.”
Others involved in the bill’s passage felt more positive. The outlet reported that House Republican Minority Leader Lauren Matsumoto said: “We talk about cost of living all the time in this state, and we’ve been looking for an income tax cut for a very, very long time. I’m really encouraged that we’re going to be putting more money in the pockets of those in our communities.”
Do you live in Hawaii? What do you think of the major tax reform? Email a.higham@newsweek.com.
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