The state’s income tax cut that started last year is being renegotiated by the state Legislature to make up for significant future budget shortfalls due to lost federal funding.
Hawaiʻi residents were supposed to continue to see income taxes decrease through the year 2031. It’s expected to cost the state over a billion dollars in revenue when fully implemented.
The Senate sent the House a measure that preserved the future income tax cuts and instead focused on cutting vacant positions and sunsetting various tax credits, including those for renewable energy.
But the House passed an amended version of it that would pause future cuts for most residents and increase the tax rate for the top three income brackets.
House Finance Chair Chris Todd spoke on the floor during Tuesday’s marathon session. He explained that it’s something that will be negotiated in the coming weeks between the two chambers.
“ I look forward to doing my best to take the best parts of the Senate measure and the best parts of the House measure. Figuring it out and reporting back in a couple weeks with something we can hopefully all support,” he said.
“We did incur about a billion dollars in flood damages. We also had a proposed federal budget that eliminates virtually all Native Hawaiian programming, which will have a direct impact on our budget and our priorities in conference. Still continuing to assess, but I'm confident we'll find a good way forward,” Todd said.
All House Republicans voted against the measure. It will next go to conference committee, one of the final steps of the legislative process.
