Hawaii Senate approves nation’s highest income tax rate

HONOLULU — The Hawaii Senate on Tuesday passed legislation that would increase the income tax paid by Hawaii’s top wage earners to 16%, which would give the islands the highest state income tax rate in the nation.

The Senate voted 24-1 in favor of the bill, which cited a need to maintain essential government services at a time when the coronavirus pandemic and subsequent drop in tourism led state tax revenues to shrink. There was no discussion or debate on the Senate floor regarding the measure.

The legislation also hikes the capital gains tax, corporate tax and taxes on luxury real estate sales.

The bill will now go to the House for consideration. House lawmakers have passed their own legislation raising the capital gains tax.

California is currently the state with the highest income tax rate in the nation, at 13.3% for individuals earning more than $1 million a year.

Hawaii’s 16% rate would apply to those earning more than $200,000 a year. The rate would revert to the existing rate of 11% after 2027.

Lawmakers say they want to avoid budget cuts recommended by Gov. David Ige to cope with the shortfall, including those that would subtract funds from public schools, sex abuse treatment, plant and pest disease control and family planning services.

But critics say the high individual income tax rate risks harming businesses because some businesses owners file their company’s taxes through their individual returns. Higher taxes could eat into their bottom lines, taking away money they would use to invest or hire workers, the critics say.

Hawaii’s proposed new top income tax rate would also outstrip the largest combined local and state tax rate in the nation, paid by the highest income earners in New York City, which is currently 12.7%.

  1. truth be known March 10, 2021 1:34 pm Reply

    What a great way to get rid of the best and brightest on the islands. Many professionals who are successful have incomes in the $200,00 to $400,000 range. We are already losing medical professionals right and left. This will greatly exacerbate the flight to the mainland. Governor Ige is right to trim the budget rather than implement this ridiculous tax increase. Why can’t the legislature do like the other states and increase the rate for people who make more than a million a year? But that would require the legislature to make the hard decisions to trim the budget.

  2. George Ho March 10, 2021 6:04 pm Reply

    This is what happens when out of control democrats run an economy. They have NO business sense and are clueless on how to set a budget and stick to it.

  3. Erzincanli March 11, 2021 11:36 am Reply

    It is clear that nobody in the state senate has had any business experience. in business if your income goes down- you REDUCE COSTS. Hawaii has by far the highest number of government employees per capita in the nation – the senators must think that every one not employed by the state owe money to the state employees – who went through this pandemic with no furloughs or lay offs. It is time to boot all the senators out and elect representatives who will work for the people of Hawaii and not just for the government employees.

  4. RGLadder37 March 11, 2021 10:20 pm Reply

    Does government have a legal right to the richer people in the community? I don’t know. Why don’t you ask David Ige that when he signed a appropriations for $34 million dollars something like that, just to build Aloha Stadium. It is coming from these rich guys in town who will be forking up the steaks and potatoes and some of their French fries and salads that comes along with their dinners. I do know that the governor will be backed up by educators or degree earners. But if you’re that rich guy, are you actually for David Ige in all of this free enterprise system we have in Hawai’i? Make up your minds. Who are you going to side in with. Is it the governor who will play puppet governor and try to pull weight with state legislatures, or are you going to slug it out with the rich boys in town? This is the time you might want to decide. Which one are you in the community. I think I am being truthful here by asking bloggers which person are they rooting for. Governor David Ige or that rich boy in town?

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