Tax Profits Like Paychecks
Tax capital gains at the same rates as ordinary income.
Hawaiʻi taxes a nurse’s paycheck at higher rates than an investor’s profit from selling stock or land. We want to close that gap.
estimated new revenue each year
of it from the top 1 percent of households
gap between the top income tax rate on wages (13%) and the capital gains rate (7.25%), up from 3.75 points
The loophole
A nurse or a hotel worker pays Hawaiʻi’s regular income tax rates on every paycheck. But profits from selling stocks, land, and other investments are capped at 7.25 percent, even for the highest-income households, whose wages are now taxed at up to 13 percent.
Act 24 (2026) raised the top rate on wages but left the capital gains rate alone, so the gap between work and wealth grew from 3.75 to 5.75 percentage points.
What we are asking for
Tax capital gains at the same rates as ordinary income, so income from owning is taxed like income from working.
What it would do
- Raise over $100 million a year.
- Collect about 90 percent of it from the top 1 percent of households. Most local families would pay nothing more.
The 7.25% rate mostly benefits the top 1 percent
Share of the tax break today, which is essentially the share of new tax if gains were taxed like wages. Hawaiʻi households ranked by taxable income, tax year 2027.
Source: Hawaiʻi Appleseed tax model (Census-Forecaster), Act 24 baseline, tax year 2027, residents only, with behavioral response.
Where the new tax would fall
Taxing capital gains like ordinary income, by household income group, tax year 2027.
| Household group | Average new tax per household | Households paying more | Total new revenue |
|---|---|---|---|
| Top 1%over $661,000 | $20,060 | 99% | $98.9M |
| Next 4%$373,000–$660,000 | $524 | 86% | $10.3M |
| Next 15%$204,000–$373,000 | $14 | 24% | $1.0M |
| Next 20%$130,000–$204,000 | under $1 | 8% | <$0.1M |
| Bottom 60%under $130,000 | $0 | 0% | $0 |
| All households | $110M |
Averages are across every household in the group, including those who owe nothing more. Income is taxable income. Source: same model as above.
Estimate: Hawaiʻi Appleseed tax model, tax year 2027, Hawaiʻi residents only, accounting for fewer gains being realized at a higher rate.
Help us close the gap
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Our other 2027 priorities: Keep Working Families’ Tax Credits and Increase the Tax on Luxury Homes. See all three.