The top 1% of Hawaiʻi's income earners will get a tax cut of about $43,000 next year. The bottom 20% will see a reduction of about $90.
That's according to a recent analysis of President Trump's mega budget bill HR 1 by Hawaiʻi's Appleseed Center for Law and Economic Justice.
Director of Tax & Budget Policy Devin Thomas explained that while everyone will see some reduction in taxes, for lower- and middle-class households, that will likely be outweighed by rising costs.
“Due to the projected impact of tariffs, the cost of living is expected to skyrocket,” he said. “What our national partners found is that most of the tax cut benefits for folks at the lower to middle end are going to be essentially nullified by increasing cost of living anyway.”
He explained the state will also likely need to think of different ways to increase revenue to cover reductions to Medicaid or federal food assistance programs that will pay for the tax cuts in HR1.
Thomas suggested that the Legislature could reconsider the historical state income tax reduction that was passed in 2024. It’s expected to cost the state about $5 billion over the next six years.
He also said that a higher tax on capital gains earned from investments or through the sale of property could be another way to redistribute tax burdens to the state’s high-income earners.
