The proposed amendments to the Hawaii Revised Statutes would significantly alter the income tax structure for higher earners, increasing rates across various income brackets, particularly those earning over $400,000 annually. By targeting high-income earners, the bill aims to bolster state funds that are essential for providing public services and addressing the gap in income inequality exacerbated by the pandemic. This tax increase is viewed by proponents as a means to ensure that wealthier residents contribute a fair share towards the state’s recovery efforts.
Summary
SB171, introduced in the 2023 legislative session, aims to address the economic challenges faced by the State of Hawaii in the aftermath of the COVID-19 pandemic. The bill proposes an increase in the income tax rate by five percent for the highest-income earners for a period of six years. This legislative action is positioned as a necessary step to meet the state’s financial needs amid reduced tax revenues influenced by economic downturns and rising inflation rates, which were reported to have reached as high as 7.5 percent.
Contention
However, the bill has sparked debate among lawmakers and stakeholders. Supporters argue that targeting high-income earners is justified given the persistent inequities within the state’s recovery from the pandemic, suggesting that this tax increase is pivotal for reinvesting in vital public services. Opponents, on the other hand, may view this as a deterrent for wealth retention and economic growth within the state, expressing concerns that increased tax burdens could lead to capital flight or deter new investments in Hawaii's economy.
A resolution to direct the Clerk of the House of Representatives to only present to the Governor enrolled House bills finally passed by both houses of the One Hundred Third Legislature.