Isles require new tax calculus to thrive
Across Hawaiʻi, the effects of recent federal budget cuts are becoming impossible to ignore. Passed earlier this year, the One Big Beautiful Budget Act (OBBBA) may sound like progress, but its true impact is devastating: permanent cuts to programs that support Hawaiʻi’s working families.
Funding is being slashed for health care, food assistance, affordable housing, climate and environmental programs, transportation, education, and research at the University of Hawaiʻi. Though final numbers are still pending, the damage to our state may exceed half a billion dollars a year. That’s not just a budget figure; it’s health care, housing, education, and opportunity lost for real people.
These cuts aren’t accidental. They help finance massive federal tax breaks that overwhelmingly benefit the ultra-wealthy. By 2027, the top 10% of earners will receive nearly a third of all individual tax cuts. Meanwhile, everyday residents are left to shoulder the burden.
Hawaiʻi’s Legislature has set aside funds to soften the blow. But temporary patches won’t be enough. We need a long-term solution, rooted in local values, that keeps essential programs alive and funded.
The best way forward is also the fairest. Those who have gained the most should be asked to contribute their fair share.
We can generate the revenue needed to protect essential services without raising taxes on the great majority of Hawaiʻi residents. By focusing on the highest earners and largest corporations, we can keep our communities strong, even as federal support disappears.
Here’s how:
Create a new income tax bracket for the top 1%, with a modest 3% increase in the tax rate.
Tax capital gains like ordinary income so investment profits aren’t taxed less than wages.
Close the real estate investment trust (REIT) loophole to tax real estate investment trusts like other corporations.
Raise the conveyance tax on properties sold for over $5 million.
Rework Hawaiʻi’s 2024 tax cuts to favor working families.
This isn’t about punishing success. It’s about protecting Hawaiʻi. When billionaires get tax breaks, our keiki shouldn’t suffer. When mainland investors profit off local land, our kupuna shouldn’t go without care.
Some will argue that these tax changes will drive wealthy residents away. But the facts say otherwise. People stay in Hawaiʻi because of family, culture and connection to the land, and not because of marginal tax differences. What actually drives people away is a high cost of living, lack of opportunity and underfunded public services. Investing in public goods, such as health care, housing, education and climate resilience, makes Hawaiʻi more livable for everyone.
Fortunately, not everything requires funding. A climate resilience program that funds itself is “carbon cashback,” which would reduce greenhouse gas emissions significantly while rewarding people as they reduce their fossil fuel pollution.
Overall, however, the OBBBA tests our values. When the federal government steps back, will Hawaiʻi step up? We can let Washington’s choices define us, or we can define our own path forward. By investing in each other, we honor the spirit of aloha that has always carried our islands through hard times.
Let’s lead with courage and clarity. Let’s fund what matters. Let’s tax fairly, spend wisely and live with aloha.