SB2468

SECTION 1. The legislature finds that recent federal tax cuts enacted primarily for the benefit of the nation's highest-income individuals have been financed, in part, through reductions and restructuring in federal medicaid funding. These federal policy choices have shifted significant costs and responsibilities onto states, requiring them to absorb funding gaps in order to preserve access to essential health care services for vulnerable populations. As a result, states such as Hawaii face increased fiscal pressure to maintain medicaid coverage, support health care providers, and prevent the erosion of critical health services for residents who rely on them.

The legislature further finds that federal cuts and changes to medicaid have also resulted in the potential loss of $400,000,000 in federal medicaid spending in the State that will strain hospitals and community health centers and result in the potential loss of health care coverage for as many as forty-one thousand Hawaii residents.

The legislature further finds that a modest surcharge on taxable income exceeding $1,000,000 would provide dedicated revenue to address these needs while ensuring that Hawaii's highest-income taxpayers contribute their fair share to the State's priorities.

Similar taxes have been successfully implemented in other states, including Massachusetts, which enacted a four per cent surtax on taxable income over $1,000,000 in 2023. Early data from Massachusetts shows that the tax has generated substantial revenue without causing significant taxpayer migration or economic harm.

Accordingly, the purpose of this Act is to establish a two per cent surcharge on taxable income exceeding $1,000,000 to provide funding, if approved by the legislature, for the State's medicaid program.

SECTION 2. Section 235-51, Hawaii Revised Statutes, is amended to read as follows:

"§235-51 Tax imposed on individuals; rates. (a) There is hereby imposed on the taxable income of every:

(1) Taxpayer who files a joint return under section 235-93; and

(2) Surviving spouse,

a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2017:

If the taxable income is: The tax shall be:

Not over $4,800 1.40% of taxable income

Over $4,800 but $67.00 plus 3.20% of

not over $9,600 excess over $4,800

Over $9,600 but $221.00 plus 5.50% of

not over $19,200 excess over $9,600

Over $19,200 but $749.00 plus 6.40% of

not over $28,800 excess over $19,200

Over $28,800 but $1,363.00 plus 6.80% of

not over $38,400 excess over $28,800

Over $38,400 but $2,016.00 plus 7.20% of

not over $48,000 excess over $38,400

Over $48,000 but $2,707.00 plus 7.60% of

not over $72,000 excess over $48,000

Over $72,000 but $4,531.00 plus 7.90% of

not over $96,000 excess over $72,000

Over $96,000 but $6,427.00 plus 8.25% of

not over $300,000 excess over $96,000

Over $300,000 but $23,257.00 plus 9.00% of

not over $350,000 excess over $300,000

Over $350,000 but $27,757.00 plus 10.00% of

not over $400,000 excess over $350,000

Over $400,000 $32,757.00 plus 11.00% of

excess over $400,000.

In the case of any taxable year beginning after December 31, 2024:

If the taxable income is: The tax shall be:

Not over $19,200 1.40% of taxable income

Over $19,200 but $269.00 plus 3.20% of

not over $28,800 excess over $19,200

Over $28,800 but $576.00 plus 5.50% of

not over $38,400 excess over $28,800

Over $38,400 but $1,104.00 plus 6.40% of

not over $48,000 excess over $38,400

Over $48,000 but $1,718.00 plus 6.80% of

not over $72,000 excess over $48,000

Over $72,000 but $3,350.00 plus 7.20% of

not over $96,000 excess over $72,000

Over $96,000 but $5,078.00 plus 7.60% of

not over $250,000 excess over $96,000

Over $250,000 but $16,782.00 plus 7.90% of

not over $350,000 excess over $250,000

Over $350,000 but $24,682.00 plus 8.25% of

not over $450,000 excess over $350,000

Over $450,000 but $32,932.00 plus 9.00% of

not over $550,000 excess over $450,000

Over $550,000 but $41,932.00 plus 10.00% of

not over $650,000 excess over $550,000

Over $650,000 $51,932.00 plus 11.00% of

excess over $650,000.

In the case of any taxable year beginning after December 31, 2026:

If the taxable income is: The tax shall be:

Not over $28,800 1.40% of taxable income

Over $28,800 but $403.00 plus 3.20% of

not over $38,400 excess over $28,800

Over $38,400 but $710.00 plus 5.50% of

not over $48,000 excess over $38,400

Over $48,000 but $1,238.00 plus 6.40% of

not over $72,000 excess over $48,000

Over $72,000 but $2,774.00 plus 6.80% of

not over $96,000 excess over $72,000

Over $96,000 but $4,406.00 plus 7.20% of

not over $250,000 excess over $96,000

Over $250,000 but $15,494.00 plus 7.60% of

not over $350,000 excess over $250,000

Over $350,000 but $23,094.00 plus 7.90% of

not over $450,000 excess over $350,000

Over $450,000 but $30,994.00 plus 8.25% of

not over $550,000 excess over $450,000

Over $550,000 but $39,244.00 plus 9.00% of

not over $650,000 excess over $550,000

Over $650,000 but $48,244.00 plus 10.00% of

not over $800,000 excess over $650,000

Over $800,000 $63,244.00 plus 11.00% of

excess over $800,000.

In the case of any taxable year beginning after December 31, 2028:

If the taxable income is: The tax shall be:

Not over $38,400 1.40% of taxable income

Over $38,400 but $538.00 plus 3.20% of

not over $48,000 excess over $38,400

Over $48,000 but $845.00 plus 5.50% of

not over $72,000 excess over $48,000

Over $72,000 but $2,165.00 plus 6.40% of

not over $96,000 excess over $72,000

Over $96,000 but $3,701.00 plus 6.80% of

not over $250,000 excess over $96,000

Over $250,000 but $14,173.00 plus 7.20% of

not over $350,000 excess over $250,000

Over $350,000 but $21,373.00 plus 7.60% of

not over $450,000 excess over $350,000

Over $450,000 but $28,973.00 plus 7.90% of

not over $550,000 excess over $450,000

Over $550,000 but $36,873.00 plus 8.25% of

not over $650,000 excess over $550,000

Over $650,000 but $45,123.00 plus 9.00% of

not over $800,000 excess over $650,000

Over $800,000 but $58,623.00 plus 10.00% of

not over $950,000 excess over $800,000

Over $950,000 $73,623.00 plus 11.00% of

excess over $950,000.

(b) There is hereby imposed on the taxable income of every head of a household a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2017:

If the taxable income is: The tax shall be:

Not over $3,600 1.40% of taxable income

Over $3,600 but $50.00 plus 3.20% of

not over $7,200 excess over $3,600

Over $7,200 but $166.00 plus 5.50% of

not over $14,400 excess over $7,200

Over $14,400 but $562.00 plus 6.40% of

not over $21,600 excess over $14,400

Over $21,600 but $1,022.00 plus 6.80% of

not over $28,800 excess over $21,600

Over $28,800 but $1,512.00 plus 7.20% of

not over $36,000 excess over $28,800

Over $36,000 but $2,030.00 plus 7.60% of

not over $54,000 excess over $36,000

Over $54,000 but $3,398.00 plus 7.90% of

not over $72,000 excess over $54,000

Over $72,000 but $4,820.00 plus 8.25% of

not over $225,000 excess over $72,000

Over $225,000 but $17,443.00 plus 9.00% of

not over $262,500 excess over $225,000

Over $262,500 but $20,818.00 plus 10.00% of

not over $300,000 excess over $262,500

Over $300,000 $24,568.00 plus 11.00% of

excess over $300,000.

In the case of any taxable year beginning after December 31, 2024:

If the taxable income is: The tax shall be:

Not over $14,400 1.40% of taxable income

Over $14,400 but $202.00 plus 3.20% of

not over $21,600 excess over $14,400

Over $21,600 but $432.00 plus 5.50% of

not over $28,800 excess over $21,600

Over $28,800 but $828.00 plus 6.40% of

not over $36,000 excess over $28,800

Over $36,000 but $1,289.00 plus 6.80% of

not over $54,000 excess over $36,000

Over $54,000 but $2,513.00 plus 7.20% of

not over $72,000 excess over $54,000

Over $72,000 but $3,809.00 plus 7.60% of

not over $187,500 excess over $72,000

Over $187,500 but $12,587.00 plus 7.90% of

not over $262,500 excess over $187,500

Over $262,500 but $18,512.00 plus 8.25% of

not over $337,500 excess over $262,500

Over $337,500 but $24,699.00 plus 9.00% of

not over $412,500 excess over $337,500

Over $412,500 but $31,449.00 plus 10.00% of

not over $487,500 excess over $412,500

Over $487,500 $38,949.00 plus 11.00% of

excess over $487,500.

In the case of any taxable year beginning after December 31, 2026:

If the taxable income is: The tax shall be:

Not over $21,600 1.40% of taxable income

Over $21,600 but $302.00 plus 3.20% of

not over $28,800 excess over $21,600

Over $28,800 but $533.00 plus 5.50% of

not over $36,000 excess over $28,800

Over $36,000 but $929.00 plus 6.40% of

not over $54,000 excess over $36,000

Over $54,000 but $2,081.00 plus 6.80% of

not over $72,000 excess over $54,000

Over $72,000 but $3,305.00 plus 7.20% of

not over $187,500 excess over $72,000

Over $187,500 but $11,621.00 plus 7.60% of

not over $262,500 excess over $187,500

Over $262,500 but $17,321.00 plus 7.90% of

not over $337,500 excess over $262,500

Over $337,500 but $23,246.00 plus 8.25% of

not over $412,500 excess over $337,500

Over $412,500 but $29,433.00 plus 9.00% of

not over $487,500 excess over $412,500

Over $487,500 but $36,183.00 plus 10.00% of

not over $600,000 excess over $487,500

Over $600,000 $47,433.00 plus 11.00% of

excess over $600,000.

In the case of any taxable year beginning after December 31, 2028:

If the taxable income is: The tax shall be:

Not over $28,800 1.40% of taxable income

Over $28,800 but $403.00 plus 3.20% of

not over $36,000 excess over $28,800

Over $36,000 but $634.00 plus 5.50% of

not over $54,000 excess over $36,000

Over $54,000 but $1,624.00 plus 6.40% of

not over $72,000 excess over $54,000

Over $72,000 but $2,776.00 plus 6.80% of

not over $187,500 excess over $72,000

Over $187,500 but $10,630.00 plus 7.20% of

not over $262,500 excess over $187,500

Over $262,500 but $16,030.00 plus 7.60% of

not over $337,500 excess over $262,500

Over $337,500 but $21,730.00 plus 7.90% of

not over $412,500 excess over $337,500

Over $412,500 but $27,655.00 plus 8.25% of

not over $487,500 excess over $412,500

Over $487,500 but $33,842.00 plus 9.00% of

not over $600,000 excess over $487,500

Over $600,000 but $43,967.00 plus 10.00% of

not over $712,500 excess over $600,000

Over $712,500 $55,217.00 plus 11.00% of

excess over $712,500.

(c) There is hereby imposed on the taxable income of (1) every unmarried individual (other than a surviving spouse, or the head of a household) and (2) on the taxable income of every married individual who does not make a single return jointly with the individual's spouse under section 235-93 a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2017:

If the taxable income is: The tax shall be:

Not over $2,400 1.40% of taxable income

Over $2,400 but $34.00 plus 3.20% of

not over $4,800 excess over $2,400

Over $4,800 but $110.00 plus 5.50% of

not over $9,600 excess over $4,800

Over $9,600 but $374.00 plus 6.40% of

not over $14,400 excess over $9,600

Over $14,400 but $682.00 plus 6.80% of

not over $19,200 excess over $14,400

Over $19,200 but $1,008.00 plus 7.20% of

not over $24,000 excess over $19,200

Over $24,000 but $1,354.00 plus 7.60% of

not over $36,000 excess over $24,000

Over $36,000 but $2,266.00 plus 7.90% of

not over $48,000 excess over $36,000

Over $48,000 but $3,214.00 plus 8.25% of

not over $150,000 excess over $48,000

Over $150,000 but $11,629.00 plus 9.00% of

not over $175,000 excess over $150,000

Over $175,000 but $13,879.00 plus 10.00% of

not over $200,000 excess over $175,000

Over $200,000 $16,379.00 plus 11.00% of

excess over $200,000.

In the case of any taxable year beginning after December 31, 2024:

If the taxable income is: The tax shall be:

Not over $9,600 1.40% of taxable income

Over $9,600 but $134.00 plus 3.20% of

not over $14,400 excess over $9,600

Over $14,400 but $288.00 plus 5.50% of

not over $19,200 excess over $14,400

Over $19,200 but $552.00 plus 6.40% of

not over $24,000 excess over $19,200

Over $24,000 but $859.00 plus 6.80% of

not over $36,000 excess over $24,000

Over $36,000 but $1,675.00 plus 7.20% of

not over $48,000 excess over $36,000

Over $48,000 but $2,539.00 plus 7.60% of

not over $125,000 excess over $48,000

Over $125,000 but $8,391.00 plus 7.90% of

not over $175,000 excess over $125,000

Over $175,000 but $12,341.00 plus 8.25% of

not over $225,000 excess over $175,000

Over $225,000 but $16,466.00 plus 9.00% of

not over $275,000 excess over $225,000

Over $275,000 but $20,966.00 plus 10.00% of

not over $325,000 excess over $275,000

Over $325,000 $25,966.00 plus 11.00% of

excess over $325,000.

In the case of any taxable year beginning after December 31, 2026:

If the taxable income is: The tax shall be:

Not over $14,400 1.40% of taxable income

Over $14,400 but $202.00 plus 3.20% of

not over $19,200 excess over $14,400

Over $19,200 but $355.00 plus 5.50% of

not over $24,000 excess over $19,200

Over $24,000 but $619.00 plus 6.40% of

not over $36,000 excess over $24,000

Over $36,000 but $1,387.00 plus 6.80% of

not over $48,000 excess over $36,000

Over $48,000 but $2,203.00 plus 7.20% of

not over $125,000 excess over $48,000

Over $125,000 but $7,747.00 plus 7.60% of

not over $175,000 excess over $125,000

Over $175,000 but $11,547.00 plus 7.90% of

not over $225,000 excess over $175,000

Over $225,000 but $15,497.00 plus 8.25% of

not over $275,000 excess over $225,000

Over $275,000 but $19,622.00 plus 9.00% of

not over $325,000 excess over $275,000

Over $325,000 but $24,122.00 plus 10.00% of

not over $400,000 excess over $325,000

Over $400,000 $31,622.00 plus 11.00% of

excess over $400,000.

In the case of any taxable year beginning after December 31, 2028:

If the taxable income is: The tax shall be:

Not over $19,200 1.40% of taxable income

Over $19,200 but $269.00 plus 3.20% of

not over $24,000 excess over $19,200

Over $24,000 but $422.00 plus 5.50% of

not over $36,000 excess over $24,000

Over $36,000 but $1,082.00 plus 6.40% of

not over $48,000 excess over $36,000

Over $48,000 but $1,850.00 plus 6.80% of

not over $125,000 excess over $48,000

Over $125,000 but $7,086.00 plus 7.20% of

not over $175,000 excess over $125,000

Over $175,000 but $10,686.00 plus 7.60% of

not over $225,000 excess over $175,000

Over $225,000 but $14,486.00 plus 7.90% of

not over $275,000 excess over $225,000

Over $275,000 but $18,436.00 plus 8.25% of

not over $325,000 excess over $275,000

Over $325,000 but $22,561.00 plus 9.00% of

not over $400,000 excess over $325,000

Over $400,000 but $29,311.00 plus 10.00% of

not over $475,000 excess over $400,000

Over $475,000 $36,811.00 plus 11.00% of

excess over $475,000.

(d) The tax imposed by section 235-2.45 on estates and trusts shall be determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $2,000 1.40% of taxable income

Over $2,000 but $28.00 plus 3.20% of

not over $4,000 excess over $2,000

Over $4,000 but $92.00 plus 5.50% of

not over $8,000 excess over $4,000

Over $8,000 but $312.00 plus 6.40% of

not over $12,000 excess over $8,000

Over $12,000 but $568.00 plus 6.80% of

not over $16,000 excess over $12,000

Over $16,000 but $840.00 plus 7.20% of

not over $20,000 excess over $16,000

Over $20,000 but $1,128.00 plus 7.60% of

not over $30,000 excess over $20,000

Over $30,000 but $1,888.00 plus 7.90% of

not over $40,000 excess over $30,000

Over $40,000 $2,678.00 plus 8.25% of

excess over $40,000.

(e) Any taxpayer, other than a corporation, acting as a business entity in more than one state who is required by this chapter to file a return may elect to report and pay a tax of .5 per cent of the taxpayer's annual gross sales if the:

(1) Taxpayer's only activities in this State consist of sales;

(2) Taxpayer does not own or rent real estate or tangible personal property; and

(3) Taxpayer's annual gross sales in or into this State during the tax year is not in excess of $100,000.

(f) If a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

(1) The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

(A) The taxable income reduced by the amount of net capital gain, or

(B) The amount of taxable income taxed at a rate below 7.25 per cent, plus

(2) A tax of 7.25 per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986.

(g) In addition to the taxes imposed under subsections (a), (b), and (c), there is hereby imposed on the taxable income of every taxpayer filing a return under this chapter, a surcharge of two per cent of the taxable income in excess of $1,000,000.

The surcharge imposed by this subsection shall apply to the taxable income of every taxpayer, regardless of filing status.

The surcharge calculated under this subsection shall be a separate liability and shall be added to the tax liability calculated under subsections (a), (b), and (c).

Revenues collected under this subsection for a taxable year shall be deposited into a subaccount and earmarked for the state medicaid program. If the legislature in the regular session immediately following the taxable year so approves, by concurrent resolution, the revenues shall be released and expended for the purposes of funding the state medicaid program. If the legislature fails to approve such use, the revenues shall be deposited into the general fund."

SECTION 3. New statutory material is underscored.

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

INTRODUCED BY:

_____________________________

THE SENATE	S.B. NO.	2468
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII