Bill > SB349

This bill proposes to change Hawaii's tax code by eliminating the separate tax rate for capital gains and instead taxing capital gains income at the same rate as ordinary income. The legislature finds that the current capital gains tax rate of 7.25% is lower than the tax rates many residents pay on wages and salaries, and primarily benefits wealthy individuals, including nonresident real estate investors. According to the Department of Taxation, taxing capital gains at ordinary income rates could generate over $132 million in its first year, potentially rising to $187 million within six years. The bill would repeal existing provisions that set a special capital gains tax rate and remove language that limits the tax on capital gains. The proposed changes would apply to taxable years beginning after December 31, 2024, meaning the new tax treatment would first take effect for the 2025 tax year. The legislature argues that this change would strengthen tax fairness for working families and generate revenue that could be used to support various government programs, including tax credits, emergency preparedness, public education, affordable housing, mental health services, and climate change adaptation.

Budget and Finance

https://www.capitol.hawaii.gov/session/measure_indiv.aspx?billtype=SB&billnumber=349&year=2026