The Price of Paradise: Hawaii Becomes Fifth State to Adopt New Income Tax Brackets

The Price of Paradise: Hawaii Becomes Fifth State to Adopt New Income Tax Brackets on High-Earners

 by Joseph Henchman and Mark Robyn

 New Top Rate of 11% on Income Over $200,000 is Highest State Rate in U.S.

Fiscal Fact No. 169 

The Hawaii Legislature forced through several tax increases on May 11, including an income tax increase and tax increases on cigarettes and other tobacco products, among others. With the exception of the cigarette tax increase, all these tax increases were vetoed by Governor Linda Lingle on May 7 in Hawaii’s first-ever public veto ceremony attended by nearly a thousand taxpayers and citizens. However, on May 11 the state legislature was able to override each of the vetoes and enact the tax increases.

The income tax increase is retroactive to January 1, 2009, and expires on December 31, 2015. The cigarette tax will go up on July 1, 2009 and increase again in 2010 and 2011. The hotel accommodations tax also goes up 1 percentage point on July 1, 2009 and again on July 1, 2010, temporarily through 2015. The conveyance tax increase permanently takes effect on July 1, 2009.

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