Gov. Josh Green approved the biggest tax cut in state history.
The new law takes Hawaiʻi from having one of the highest income tax rates in the country to one of the lowest.
The income tax cut is part of Green’s plan to decrease living costs for working families.
“Our cost of living has been hurting us. It's hurting our ʻohana, it hurts our friends and it hurts community wellbeing,” he said.
“We've even seen tragic outcomes in people's lives when they feel they can't care for their families. They struggle to make ends meet in our state. People are working multiple jobs and they live paycheck to paycheck.”
The law eliminates the state’s lowest tax brackets and lowers the rates for all tax brackets.
For example, a family of four making $100,000 a year currently pays about $7,000 in income taxes. In 2031, when the law is in full effect, they will only pay about $4,500.
Even though high-income earners will also be receiving a tax cut, the taxation office explained that the law will make the state’s income tax structure more progressive. High-income earners currently pay about 60% of the state’s annual income tax. The new law will increase that to about 80%.
The cuts will take place in phases over a seven-year period and are projected to cost the state $1.3 billion in yearly revenue.
That’s why Green’s administration will be looking closely at cost-saving measures, such as eliminating unnecessary positions in state government — specifically those that have been vacant for four years.
“If they've been vacant for four years or more, when I was asked by my own team whether or not we should take that move, I said, 'Look, give me a break.' If we can't fill it after four years, let's retrofit our government,” Green said.
“Let's begin to invest in technologies where they can help and let's pay people better so that they stay in these important jobs. ... I'd rather see people paid a little bit better and we get rid of some of the, um, the excess that's been in the budget.”
He explained because the measure will be implemented over seven years, it also gives the Legislature time to balance the state’s revenue as the cuts ramp up.
