A key House lawmaker announced a new tax plan Wednesday that would preserve a key piece of the multiyear state income tax cuts that passed the Legislature two years ago, and would also raise income taxes for some of Hawaiʻi’s highest paid residents.

The complicated proposal offered up by House Finance Chair Chris Todd is a signal that some influential state Democrats are dissatisfied with Gov. Josh Green’s plan to indefinitely defer the huge package of tax cuts that were promised to voters in 2024.

They are not alone. The Finance Committee held a public hearing on Tuesday on Green’s bill to suspend the tax cuts and received more than 150 pieces of testimony opposing any effort to suspend the cuts.

Todd is proposing a hybrid bill that would leave in place a series of increases in the standard deductions that all income tax filers claim. He said that “would provide meaningful tax relief for all income levels, but is particularly impactful for working-class families.”

Those increases in the standard deduction were approved by lawmakers in 2024 as part of a multiyear package of tax cuts. Green is now proposing to suspend any further income tax cuts to raise money to help the state cope with reductions in federal support for Medicaid and food aid for the poor.

Todd said the standard deduction has nearly quadrupled thanks to the 2024 tax cuts, “and provided a ton of relief for folks who needed it the most.”

“This proposal would continue that work,” he said, by continuing those increases and boosting the standard deduction by another 50% between now and 2030.

Tax Rate Tweaks

Todd is not rejecting Green’s tax plan entirely.

He said his proposed amendments to House Bill 2306 would suspend a series of adjustments in income tax brackets that were part of the 2024 tax package, just as Green has proposed. Suspending those changes in the tax brackets would reduce the taxpayer savings from the 2024 tax cuts in the years ahead.

Todd also offered his own proposal to increase the top marginal income tax rates for the wealthiest Hawaiʻi taxpayers in the top three income tax brackets.

He offered the example of joint filers with a combined income of $450,000, saying they would see the tax on portions of their incomes increased from 9% to 10%. Tax filers in the next two highest tax brackets would also see comparable increases of 1%, he said.

“Everyone who has savings would still continue to save unless you’re making, like, millions and millions of dollars,” Todd said, adding that some of the ongoing tax bracket changes would still be suspended.

Todd also proposed a restructuring of the child and dependent care tax credit to target that tax break more for the middle class. He said about two-thirds of the benefit from that tax break currently goes to high-income families.

He suggested lawmakers can also look to a variety of other tax proposals pending at the Legislature to help raise money, and can also “try to streamline things” in the state budget.

The increase in the marginal tax rate for the highest earning residents would raise some revenue for state government, but Todd did not say how much the state would collect from that plan or explain how his proposed tax changes would affect the state’s overall finances.

The Finance Committee voted unanimously to approve Todd’s new draft, which will now go to the full House for a floor vote. If the House approves the measure, it will then advance to the Senate for further consideration later this month.

Critics of Green’s plan to suspend the tax cuts cited the high cost of living in Hawaiʻi. Patti Yasuhara of Honolulu said in written testimony Tuesday the tax cuts “gave families some much-needed breathing room. Even small amounts of relief matter in a high-cost state like Hawaii.”

Others have backed Green’s plan to suspend the tax cuts, arguing the 2024 tax package was skewed in favor of wealthy residents and did too little to help the poor and working class.

Ruth Robison of Hilo said in written testimony that Green’s bill is needed “because it is necessary to pay for benefits to the poorest and most vulnerable among us.”

The Senate Ways and Means Committee is scheduled to consider Senate Bill 3125 at noon on Thursday, which was drafted by the Green administration to suspend the tax cuts.

Civil Beat’s reporting on economic inequality is supported by the Hawaiʻi Community Foundation as part of its work to build equity for all through the CHANGE Framework; and by the Cooke Foundation.