Hawaii Passes New Millionaire Tax Bracket to Close Budget Gap

Hawaii’s Democratically controlled legislature passed a tax package Friday that establishes a new 13% income tax bracket for households earning more than $1 million per year while preserving some personal income tax cuts for lower-income filers.

The House and Senate cleared the compromise tax package (SB 3125) on the final day of the state’s legislative session. It comes after lawmakers spent months negotiating a deal to close a budget gap while maintaining the promised income tax cuts for about 90% of Hawaii families, according to senators involved in the talks.

• The deal that lawmakers reached would maintain income tax cuts passed in 2024 for joint filers earning up to $350,000 annually, and single filers earning up to $175,000.
• The deal also sunsets a renewable energy tax credit claimed by the solar industry and a capital goods tax credit used by businesses.
• The measure now heads to Hawaii Gov. Josh Green (D), who called in January for a “strategic pause” of all of the planned personal income tax cuts in order to fund essential state services like food security and child care needs.