RELATING TO TAXATION.

HB1807

HOUSE OF REPRESENTATIVES

H.B. NO.

1807

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to taxation
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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The legislature finds that the State has a
compelling interest in ensuring that public schools, affordable higher
education, transportation infrastructure, public health services, and emergency
services are adequately funded to meet current and future needs.
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Fewer than 0.5 per cent of households in
Hawaii earn over $1,000,000 per year, according to the Internal Revenue
Service.
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The wealth of households
earning over $1,000,000 has grown significantly in recent years, while those
earning under $1,000,000 continue to struggle to afford basic necessities.
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Despite their significant wealth growth,
Hawaii's highest-earning households contribute a smaller proportion of their
income in state and local taxes compared to middle- and lower-income families,
creating an inequitable distribution of the tax burden.
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While the lowest twenty per cent of income
earners in Hawaii, who make less than $22,000 per year, pay fourteen per cent
of their income in state and local taxes, the top one per cent, who earn over
$595,000 per year, pay only ten per cent, according to the Institute on
Taxation and Economic Policy.

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The
legislature further finds that in the five years between 2018 and 2022, Hawaii
was in the top five states for worsening income inequality, according to the
State Science and Technology Institute.
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In
the ten years between 2013 and 2022, Hawaii was in the top seven.
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Meanwhile, the wealthiest Hawaii residents
will receive disproportionate tax breaks due to the federal One Big Beautiful
Bill Act.
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In Hawaii, those in the top
one per cent of income will get a federal tax break of over $65,000 per year,
while those in the lowest twenty per cent will receive only $50, according to
the Institute on Taxation and Economic Policy.
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In addition, while the tax breaks for the
wealthy were made permanent by the One Big Beautiful Bill Act, those that
benefit lower-income and working-class people will expire at the end of 2028.

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The
legislature also finds that other states have tax surcharges on millionaires.
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For example, California taxes income above $1,000,000
at a rate of 14.4 per cent.
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Other states
with similar millionaire surcharge tax rates include Connecticut, Massachusetts,
New Jersey, New York, and the District of Columbia, according to the Tax
Foundation.

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The
legislature believes that establishing a high-income surtax is a fiscally
responsible means of ensuring that those who can most afford to pay are
contributing proportionately to the funding of shared public services,
promoting equity, economic stability, and long-term prosperity for the State.

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Accordingly, the purpose of this Act
is to establish an additional three per cent income surtax for certain
high-earning taxpayers.

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SECTION 2.
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Chapter 235, Hawaii Revised Statutes, is
amended by adding a new section to part III to be appropriately designated and
to read as follows:

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"
�235-
�
High-earners;
surtax.
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(a)
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In addition to any other tax imposed under this chapter, there shall be imposed
a surtax equal to three per cent of that portion of a taxpayer's taxable income
that exceeds the following threshold, based on filing status:

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(1)
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Joint filer:
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$1,000,000;

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(2)
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Head of
household or surviving spouse:
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$750,000;
and

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(3)
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Unmarried
individual (other than a surviving spouse or head of household) or married
individual filing a separate return:
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$500,000.

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(b)
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The director of taxation shall annually
adjust and publish the threshold amounts in subsection (a) to reflect any
increases in the cost of living by the same method used for federal income tax
brackets.

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(c)
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The revenues collected under this section
shall be expended for public education and transportation purposes, subject to
legislative approval.
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The director of
taxation shall report to the director of finance the total revenue collected each
taxable year pursuant to this section.
"

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SECTION
3.
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New statutory material is
underscored.

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SECTION 4.
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This Act, upon its approval, shall apply to
taxable years beginning after December 31, 2025.

INTRODUCED BY:

_____________________________

Report Title:

Income
Tax; High-Earners Surtax

Description:

Establishes
a high-earners surtax on taxable income for certain taxpayers.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.