The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Finance on March 3, 2026.
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March 3, 2026, 10 a.m.
Hawaii State Capitol
Conference Room 308 and Videoconference
To: House Committee on Finance
Rep. Chris Todd, Chair
Rep. Jenna Takenouchi, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: TESTIMONY IN OPPOSITION TO HB2306 — RELATING TO INCOME TAX
Aloha Chair, Vice Chair and other Committee members,
The Grassroot Institute of Hawaii opposes section 1 of HB2306, which would stop all planned increases in the individual income tax brackets and standard deduction starting Jan. 1, 2027.
Essentially, this section of the bill would stop the phase-in of the historic income tax cuts the Legislature unanimously approved in 2024.
These tax cuts are expected to deliver massive savings to Hawaii taxpayers. According to Taxcuthawaii.org, a family of four filing jointly with a household income of $100,000 will see their income tax liability drop from $6,034 in 2023 to $2,133 in 2031 — an annual savings of almost $4,000.[1]
But stopping the phase-in now would prevent about half of those savings from kicking in. For Hawaii residents struggling to afford basic necessities, half measures are not enough. Grocery prices in Hawaii are the highest in the United States,[2] and Hawaii’s average rents are the second highest nationwide.[3] Additionally, Hawaii’s per-kilowatt-hour electricity costs are routinely 2-3 times the national average.[4]
Tax relief is the most direct way the state can provide assistance to Hawaii families. The state can and should take action to reduce regulations that increase the price of food, housing and electricity, but Hawaii taxpayers already face the fourth-highest per capita state and local tax burden in the country.[5]
According to the Hawaii Department of Taxation, the planned income tax reductions are supposed to help reduce this burden on Hawaii’s lower and middle-income taxpayers the most. In a 2024 article, the department used the example of a family of four making $88,005 a year. Only in Oregon did that family pay more in income taxes under the pre-tax cut system.
By the time the tax cuts are fully phased in, that family’s tax burden would rank among the bottom five income tax burdens. Taxpayers making less in annual income would also see their income tax burdens drop from among the highest in the country to among the lowest.[6]
Pausing these tax cuts could also stunt business growth and job creation. A recent University of Hawaiʻi Economic Research Organization report pointed out that Hawaii is not only expensive — the state also lags behind other areas of the country in terms of wage growth and productivity.[7]
Taking away this tax relief could harm Hawaii’s efforts to improve in those areas.
For entrepreneurs who pay taxes at the individual level — using a limited liability corporation, an S-corporation or another pass-through entity — a higher income tax would reduce the amount of money they have available to invest into new business equipment or expand the number of workers they employ.
And Hawaii’s tax competitiveness score is already low: The state ranks 41 out of all 50 states and the District of Colombia, according to the Tax Foundation.[8]
Instead of harming families and businesses alike, the Legislature should eliminate wasteful or duplicative budget items. Grassroot has already publicized a list of ways in which this could be accomplished.[9]
Thank you for the opportunity to testify.
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] “Calculate Your Tax Rate,” Tax Cut Hawaii, accessed Feb. 27, 2025.
[2] Dorothy Neufeld, “Mapped: Average Weekly Grocery Bill Cost, by U.S. State,” Visual Capitalist, Jan. 14, 2026.
[3] Jonathan Jones, “U.S. Cities With the Highest Rent Prices,” Construction Coverage, Jan. 31, 2026.
[4] “Table 5.6.A. Average Price of Electricity to Ultimate Customers by End-Use Sector,” U.S. Energy Information Administration, data for December 2025 and December 2024.
[5] Joseph Johns, “State and Local Tax Collections Per Capita by State, 2025,” Tax Foundation, May 13, 2025.
[6] Seth Colby, “Estimating the Impacts of Hawaiʻi’s 2024 Tax Cut Bill,” Hawaii Department of Taxation, June 2024.
[7] Steven Bond-Smith and Erich Schwartz, “Beyond the price of paradise: Is Hawai‘i being left behind?” University of Hawaiʻi Economic Research Organization, Feb. 1, 2026.
[8] Janelle Fritts, Jared Walczak and Abir Mandal et al., “2026 State Tax Competitiveness Index,” Tax Foundation, Oct. 30, 2025.
[9] Jonathan Helton and Joe Kent, “With lawmaker will, there are ways to implement tax cuts,” Honolulu Star-Advertiser, Feb. 26, 2026.
