It also does not include a proposed 1% increase on the top three income tax brackets, which some believe could help to protect many local small business owners who file as individuals and support Hawaii’s broader economy.
SB 3125 tax-savings matters in a state where the cost of housing, food, utilities, and transportation continues to strain household budgets. It’s estimated that roughly 90% of local families could benefit from this bill.
Senate Ways and Means Committee Chair Donovan M. Dela Cruz said of the importance of preserving the full tax relief package, “Affordability for local families remains a top priority for the Senate. Despite federal funding cuts affecting our budget, we are standing by our commitment to the people by preserving and continuing the promised tax relief.”
According to the Institute on Taxation and Economic Policy, May 2026, tax savings could be as follows:
Lowest 20% (under $27,900) – $37
Second 20% ($27,900-$57,000) – $413
Middle 20% ($57,000-$98,400) – $850
Fourth 20% ($98,400-$152,000) – $1,274
Next 15% ($152,000-$345,000) – $1,773
Next 4% ($345,000-$783,000) – $2,789
Top 1% ($782,300 and up) No tax cut.
Taxing higher-income earners vs taxes on big corporations
But while lawmakers protected most of those tax cuts, a broader debate that should concern Hawaii residents is the belief that budget pressures can be solved by taxing high-income earners more. That approach may sound politically easy, but it is economically shortsighted.
When states send the message that success will be penalized with ever-higher taxes, they risk driving away the very people who invest, build small-medium sized companies, create jobs, and expand opportunities. When the highest income earners are exorbitantly taxed, it could mean investments, payrolls and jobs leave our state.
Perhaps, instead, taxes to support critical infrastructure and the integrity of much needed social programs in the state should be sought after from big corporations. Many people believe large profitable companies should contribute more, especially if households and small businesses are also being asked to pay taxes. It’s only fair.
Corporate taxes can help fund schools, roads, healthcare, public safety, and other services that businesses and residents rely on. Big corporations use public infrastructure, courts, transportation systems, and workforce training pipelines. Taxes can help cover those shared costs.
Most importantly, revenue from large corporations can lessen the need for states to rely as heavily on income taxes, sales taxes, or property taxes on residents.
Sound planning
As federal funding becomes more uncertain and limited, lawmakers must pursue smarter budgeting, greater efficiency, reducing waste, and creating conditions that lower the cost of living and encourage private-sector growth.
Cannot ignore public needs supported by state programs
It’s also a reasonable argument some are making that continuing broad tax cuts could reduce state revenue at a time when Hawaii still faces major public needs, including housing, infrastructure, education and healthcare. Furthermore, even if most families benefit, some residents may question whether the tax relief is sufficiently targeted toward those with the greatest financial need.
In other words, does the few hundreds of dollars in tax relief benefit more to lower-incomed segments in society than the state programs they benefit from which could be compromised due to budget cuts. It most likely doesn’t.
Still, Hawaii families and individuals keeping more of what they earn at a time when the state’s cost of living remains among the highest in the nation is much welcomed. The income tax relief can give families more breathing room for everyday expenses, savings and emergencies. When residents have more disposable income, they are more likely to spend money which benefits the state’s overall economy.
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