SB3125 would pause Act 46's income tax bracket changes at their current levels, increase the rates on the top three brackets, and fix the Child and Dependent Care Tax Credit (CDCTC).

It preserves the standard deduction increases that help most families while stopping the bracket shifts that disproportionately benefit high-income earners.

These changes could save the state hundreds of millions of dollars each year — revenue that could help offset expected federal funding cuts to programs like Medicaid and SNAP.

As it stands, Act 46 delivers far larger tax cuts to the wealthy than to everyone else. By 2031, the richest 1% will receive average cuts of over $12,800 a year, while the lowest-income 20% will see only about $469. The law is expected to cost $240 million in 2025 and more than $1.4 billion a year by 2031 — roughly 12% of Hawaiʻi's total tax revenue. Because income taxes make up about a third of the state's budget, losing that much revenue could force deep cuts to the programs and services that local families depend on.

At minimum, freezing the implementation of Act 46 at current bracket levels — while allowing the standard deduction to continue increasing — could save at least $296 million in Tax Year 2027 and prevent costs from ballooning to $1.4 billion a year by 2032. Low- and middle-income households that typically do not itemize would continue to receive meaningful tax relief.

SB 3125 goes further by raising the income tax rates on the top three brackets. According to fiscal analysis of a similar proposal to adjust the top five brackets, 86% of the additional revenue would come from the top 1% of earners (those making over $783,000 annually), ensuring that middle- and low-income residents are not burdened.

The bill also preserves one of Act 46's most important changes: the higher standard deduction, which rises from $2,200 to $12,000 for single filers and from $4,400 to $24,000 for couples by 2031.

By targeting the parts of Act 46 that give outsized benefits to the wealthy — while keeping tax relief for those who need it most and fixing the CDCTC — HB 2306 offers a fairer, more fiscally sustainable path forward for Hawaiʻi.

*Note that SB 3125 was amended on April 8, and it now has the same language as HB 2306