Let us be clear: There is no need for Hawaii’s legislators to reverse the historic state income tax cuts that were enacted during the 2024 legislative session.
And that’s coming not just from me, but also from Gov. Josh Green, who revealed the details of his proposed budget for fiscal 2026 at a recent news conference.
The governor said there is plenty of room in the state’s finances to accommodate the personal income tax reduction that is projected to save Hawaii taxpayers up to $7.5 billion by fiscal 2031.
Critics of the 2024 legislative session’s tax cuts have worried that the state cannot afford them. But Green said his budget factors in the tax cuts and still shows huge surpluses each year moving forward, growing from $1 billion in fiscal 2026 to $4.6 billion in 2031.
He acknowledged that about $300 million more might be needed over the next two years to account for collective bargaining negotiations and wildfire mitigation, but the budget has enough wiggle room to afford this amount and still run billion-dollar surpluses.
If the Legislature goes along with the governor’s proposals, general fund spending would actually go down by 1.85% or about $210 million compared to fiscal 2025 and leave a balanced state budget as required by the state Constitution.
Much of that reduction is from naturally expiring, nonrecurring expenditures of the Hawaii Housing Finance and Development Corp., the annual general funding for which typically hovers near zero anyway.
Some state departments are likely to see moderate funding increases. The Department of Education’s budget is expected to increase by 6%, health’s by 1% and agriculture’s by 53%.
The overall general fund budget for the executive branch is set to grow by 1%, or about $151 million, while the general fund budget as a whole will shrink by 1.85%, or $210 million.
The upshot is that the state government doesn’t need any more money at the moment, but Hawaii’s struggling residents do. This year’s tax cuts will address that need, not just for 2025, but for every year going forward.
According to an online tax calculator at grassrootinstitute.org/taxcalculator, a family of four making $95,000 in annual income will save an increasing amount on their taxes each year through 2031, starting at $1,596 in 2025, $2,114 in 2026 and resulting in a cumulative tax savings of more than $20,000.
If Hawaii legislators can keep Green’s proposed budget intact, Hawaii residents will be able to keep more of their own money for years to come.
The alternative is for the Legislature to break the promise of a brighter, less burdensome future — and go back to piling on new taxes and fueling the exodus to the mainland of locals seeking lower costs and greater business and employment opportunities.
Joe Kent is executive vice president of the Grassroot Institute of Hawaii.
