This proposal would change the income tax cuts made under Act 46 so they’re fairer and more sustainable. It would stop the tax brackets from moving each year and instead adjust them for inflation, while keeping the larger standard deduction that helps most families. These changes could save the state hundreds of millions of dollars every year—money that could help soften the impact of expected federal funding cuts.

Right now, Act 46 gives much bigger tax breaks to wealthy taxpayers than to everyone else. By 2031, the richest 1% will get average cuts of over $12,000 a year, while the lowest-income families 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, which would be about 12% of Hawaiʻi’s total tax revenue. Because income taxes make up about a third of the state’s budget, losing that much money could mean cuts to important programs and services.

The proposal keeps one major benefit: a higher standard deduction that rises from $2,200 to $12,000 for single filers and from $4,400 to $24,000 for couples by 2031. Updating Act 46 to follow inflation—like the federal government and 17 other states already do—would make Hawaiʻi’s tax system fairer for families and more reliable for the future.