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:

SECTION 1. 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. Fewer than 0.5 per cent of households in Hawaii earn over $1,000,000 per year, according to the Internal Revenue Service. 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. 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. 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.

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. In the ten years between 2013 and 2022, Hawaii was in the top seven. Meanwhile, the wealthiest Hawaii residents will receive disproportionate tax breaks due to the federal One Big Beautiful Bill Act. 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. 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.

The legislature also finds that other states have tax surcharges on millionaires. For example, California taxes income above $1,000,000 at a rate of 14.4 per cent. 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.

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.

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

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

"§235- High-earners; surtax. (a) 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:

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

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

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

(b) 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.

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

SECTION 3. New statutory material is underscored.

SECTION 4. 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.

HB 1807: INCOME TAX; HIGH-EARNERS SURTAX

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