Background FAQs

The last update to the income tax code was in the early 2000s. Since Hawai‘i is one of the only states with a progressive income tax schedule that is NOT indexed to inflation, this has led to a far greater percentage of income tax burden being shifted to middle-income households. It has forced more taxpayers into higher tax brackets, which represents an implied tax hike for those middle income earners. Governor Green and the State Legislature saw this as the time to correct this unintended burden for working families, and help improve affordability for Hawai‘i residents.

It’s estimated that Hawai‘i taxpayers will save over $5 billion by 2030. A median family of four with an $88,000 annual income will save approximately $20,000 in state taxes over the next five years.

The tax cut is expected to put more money back into the pockets of those who need it most, specifically those in the Asset Limited, Income Constrained, Employed or “ALICE” population – households with gross incomes under $30,000 to $100,000 – providing greater financial security for working families and increasing their ability to afford essential living expenses.

The state has experienced a structural budget surplus in the last few years, which allows for the reduction in taxes without cutting essential public services. Additionally, the new law includes periodic reviews of the state’s financial health to ensure that public programs remain funded.

Yes, the new tax code makes Hawai‘i’s income tax code more progressive, with high-income earners paying a greater share of the income tax burden. Presently, taxpayers making more than $150,000 contribute 53% of income tax. In 2031, taxpayers making more than $150,000 will contribute 69% of income tax.

The tax cuts will be implemented gradually over eight years, from 2024 through 2031. While the initial year introduces significant reductions, the savings grow larger in the later years as the standard deduction increases and tax bracket adjustments continue to phase in. By 2031, the standard deduction will be approximately 6 times greater compared to the pre-2024 levels, and tax rates will have decreased further, providing even greater savings over time. Learn more about the entire tax cut timeline.