Question 01

Why did the Legislature consider SB 3125?

The previous income-tax cuts — passed as Act 46 in 2024 — overwhelmingly benefited the wealthiest residents, at a cost the state budget couldn't sustain.

As it stood, Act 46 delivered far larger tax cuts to the wealthy than to everyone else. By 2031, the richest 1% would have received average cuts of over $12,800 a year, while the lowest-income 20% would have seen only about $469.

Act 46 was expected to cost more than $1.4 billion a year by 2031 — roughly 12% of Hawaiʻi's total tax revenue. Losing that revenue would've eventually forced deep cuts to the programs and services that local families depend on.

Act 46 average tax cut by 2031 — who would have benefited

Average annual income-tax cut per household, fully phased in

Richest 1%

$12,800

Lowest-income 20%

$469

The richest 1% would have received a cut roughly 27 times larger than the lowest-income 20%.

$240M

cost of the Act 46 cuts in 2025

$1.4B+

projected annual cost by 2031

≈12%

of Hawaiʻi's total tax revenue

Source: Institute on Taxation and Economic Policy — Act 46 distributional and revenue estimates.

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Question 02

What is SB 3125?

SB 3125 — now Act 24 (2026) — moved forward with a package that:

✓

Preserves the 2024 income-tax cuts for joint filers earning under about $350,000 and single filers under about $175,000.

✓

Lets tax cuts for the very highest-income households fall away and creates a new top income-tax bracket around 13 percent for single filers above $500,000 and joint filers above $1 million.

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Phases out or caps several expensive tax credits — such as renewable energy and high-tech.

Reported by Civil Beat

The deal would save the state about $680 million over five years, mostly by ending or limiting tax credits, while preserving the main tax cuts for low- and middle-income residents.

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Question 03

How will SB 3125 affect Hawaiʻi taxpayers?

The charts below show how SB 3125's income-tax-bracket changes affect residents at different income levels, compared with today's tax law and fully phased in by 2031. Nearly everyone keeps a tax cut — while the top 1%, who would have received the largest Act 46 windfall, instead pays more.

Income-tax brackets only — excludes RETITC & other tax-credit changes

Average annual tax change by income group, 2031

Change vs. current law, once fully phased in

Lowest 20%under $27,900

−$37

Second 20%$27,900–$57,000

−$413

Middle 20%$57,000–$98,400

−$850

Fourth 20%$98,400–$152,000

−$1,274

Next 15%$152,000–$345,000

−$1,773

Next 4%$345,000–$783,300

−$2,789

Top 1%$783,300 and up

+$7,051

← families pay lesstop earners pay more →

77%

of residents get a tax cut

99.9%

of the tax increase falls on the top 1%

+$7,051

average increase for the top 1%

$850

average cut for the middle 20%

Reflects SB 3125's income-tax-bracket changes only (not the bill's tax-credit changes — including the renewable energy credit, RETITC). Figures compare projected 2031 taxes with current (2026) law. Source: Institute on Taxation and Economic Policy, May 2026.

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Question 04

How are tax credits affected?

SB 3125 (now Act 24, 2026) keeps most of the 2024 low- and middle-income tax relief in place — and it pays for that partly by tightening and sunsetting a series of tax credits, especially in renewable energy, capital investment, and high-tech. The breakdown below focuses on the credits side, not the bracket and rate changes.

In budget terms, the bill funds the broader low- and middle-income bracket relief largely by scaling back business- and investment-side tax breaks — capping the renewable energy credit and sunsetting several capital, fuel, and high-tech credits.

Spotlight · Renewable energy credit

The renewable energy credit (RETITC)

The RETITC makes up most of the estimated savings from Act 24. However, this comes at an environmental cost — especially when climate change-related disasters are on the rise.

≈$40M/yr

annual cap from 2027 — less than half of recent spending

≈$343M*

estimated 5-year state savings (2027–2031)

Update · June 2026

Governor Green signed Executive Order 26-02, which protects solar projects already underway in 2026. In other words, this year's credit won't be squeezed by the new $40 million-a-year cap — that cap still kicks in starting 2027.

More detail

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Income limits — new AGI thresholds reduce or exclude higher-income claimants.

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Certification required — projects need pre-approval to claim a spot under the cap.

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Sunset in 2031 — full elimination; no safe harbor for projects already underway.

The sunset glide path

RETITC’s wind-down (amber) within the bill’s broader credit sunsets.

2027

RETITC ≈$40M/yr cap begins

2028

Tech Infrastructure Renovation Credit repealed

2029

High-Tech Investment & R&D credits repealed

2031

RETITC fully eliminated

*A modeled estimate, not an official score — from the Hawaiʻi Appleseed / Census-Forecaster RETITC fiscal model (central “OBBBA-Mid” scenario). The real figure depends on solar demand, how fast existing credits are used, and other assumptions, and could be meaningfully higher or lower. Industry reporting also warns that projects already underway in 2027 will compete for a smaller pot, and some commercial solar racing federal deadlines may no longer pencil out.

Who currently benefits

Total RETITC claims by claimant type, Tax Year 2023 — about $100M a year

Individual

$58.3M

Corporate

$38.6M

Other

$3.2M

Source: Hawaiʻi Department of Taxation, Tax Year 2023 actuals, via the Hawaiʻi Appleseed / Census-Forecaster RETITC fiscal model.

Who claims the RETITC, by income

Individual claims by adjusted gross income, Tax Year 2023

under $10K

$4.7M

$10K–$30K

$2.5M

$30K–$60K

$3.1M

$60K–$100K

$5.8M

$100K–$200K

$16.2M

$200K and up

$26.0M

$200K+ earners alone claimed about 45% of individual RETITC dollars, and the top two brackets ($100K+) took roughly 72% — which is why the bill adds income limits ($175K single / $350K joint).

Credit	Treatment under SB 3125	Timing
Renewable Energy (RETITC)Capped & sunset	Adds ≈$40M/yr cap, income limits & certification; full sunset	Cap 2027 · ends 2031
Capital Goods ExciseSunset added	Adds a sunset date (finite life)	Sunset added
Renewable Fuels ProductionSunset added	Adds a sunset date	Sunset added
Tech Infrastructure RenovationRepealed	Fully repealed	From 1/1/2028
High-Tech Business InvestmentRepealed	Fully repealed	From 1/1/2029
Research Activities (R&D)Repealed	Fully repealed	From 1/1/2029

Fiscal & policy context

The Governor's office describes Act 24 as a response to a projected nearly $3 billion revenue shortfall tied partly to federal changes. Revenue is raised mainly by paring back business and investment tax credits rather than the income-tax relief for low- and middle-income residents — the law preserves the vast majority of Act 46 bracket relief while protecting programs like SNAP and healthcare.

Sources Governor's Office Civil Beat Hawaiʻi Public Radio LegiScan Law360

SB 3125: Frequently Asked Questions