SB 3125: Frequently Asked Questions

The previous income-tax cuts — passed as Act 46 in 2024 — overwhelmingly benefited the wealthiest residents, at a cost the state budget couldn't sustain.

As it stood, Act 46 delivered far larger tax cuts to the wealthy than to everyone else. By 2031, the richest 1% will receive average cuts of over $12,800 a year, while the lowest-income 20% will see only about $469. The law is expected to cost $240 million in 2025 and more than $1.4 billion a year by 2031 — roughly 12% of Hawaiʻi's total tax revenue. Since income taxes make up about a third of the state's budget, losing that much revenue would've eventually forced deep cuts to the programs and services that local families depend on.

SB 3125 — now Act 24 (2026) — moved forward with a package that:

The charts below show how SB 3125's income-tax-bracket changes affect residents at different income levels, compared with today's tax law and fully phased in by 2031. Nearly everyone keeps a tax cut — while the top 1%, who would have received the largest Act 46 windfall, instead pays more.

SB 3125 (now Act 24, 2026) keeps most of the 2024 low- and middle-income tax relief in place — and it pays for that partly by tightening and sunsetting a series of tax credits, especially in renewable energy, capital investment, and high-tech. The breakdown below focuses on the credits side, not the bracket and rate changes.

In budget terms, the bill funds the broader low- and middle-income bracket relief largely by scaling back business- and investment-side tax breaks — capping the renewable energy credit and sunsetting several capital, fuel, and high-tech credits.