Record state tax breaks that went into effect two years ago would be suspended for all Hawaii income earners for three years beginning in the 2027 tax year, Gov. Josh Green said in his State of the State Address Monday.
“In 2025, the federal government’s severe cuts and other actions took over $3 billion out of our state’s economy, leaving us with an unforeseen budget shortfall,” Green told a packed joint House and Senate session on the House floor. “So to meet all of our responsibilities and our commitment on affordability, I am proposing that there be no changes to our tax cuts in 2026 – these and all previous tax cuts will be completely preserved — but that we pause the tax cuts planned for 2027 through 2029. This proposal will bring back $1.8 billion for critical services — $600 million of which I propose must be used for food security and child care needs.”
The state expended millions to deal with the record-long, 43-day federal government shutdown in October in which many of Hawaii’s federal employees working without pay were forced to join emergency, pop-up food banks. The state in November provided emergency funding for 161,132 island residents — representing 81,124 families — relying on monthly food assistance after President Donald Trump threatened to withhold SNAP funding.
Green called his tax proposal, “The fairest, most responsible, and most compassionate approach to dealing with the challenges the federal government has created.”
Joe Kent — executive vice president of the fiscally conservative Grassroot Institute of Hawaii that advocates for limited government — told the Honolulu Star-Advertiser that instead of an across-the-board pause in future tax cuts, Green and the Legislature should “pull back on spending. This is the easiest policy they can control.”
“I don’t see a need to do a drastic pausing on tax cuts when they haven’t tried to limit spending yet,” Kent said. “We’ve seen the tax cut, now where’s the spending cut? Hawaii residents were counting on the tax cuts to deal with Hawaii’s cost of living and now Gov. Green wants to take them back.”
Before his State of the State Address, Green had said he wanted to suspend future tax breaks only for individuals earning $200,000 and above, while keeping in place tax cuts to working class and low-income earners.
But Hawaii taxpayers at all income levels would see their future tax breaks paused for the 2027, 2028 and 2029 tax years, under Green’s newest tax proposal.
Postponing the tax breaks for everyone would result in an estimated $1.8 billion in savings for “critical services,” Green said, including $600 million for food security, early education, child care needs and “for those who need it the most.”
House and Senate leaders said after Green’s comments that they need details on how pausing the tax breaks will affect the overall state economy.
Neither House Republican leader Rep. Lauren Matsumoto nor the new head of the Hawaii Republican Party immediately responded to requests for comment.
This month the Council on Revenues projected that the state will see a modest 2% increase over the estimated $9.5 billion for the current fiscal year that ends June 30. Had the Council on Revenues forecast a 1% or 2% reduction in revenue, Green said he and legislators would be under greater pressure to pause the tax breaks this year.
He now expects thoughtful debate during the legislative session over his tax proposal because “if we don’t we will start running in the red.”
Green said, “When we came into office three years ago, too many families were having to make heartbreaking decisions — like choosing between paying rent and buying groceries, or between staying in the islands they love and leaving for the mainland.
“Too many young people didn’t see an economic future for themselves in our state. So we made affordability a top priority and we acted quickly.”
Island kupuna, Green said, “have told me they live alone on a fixed income. They’ve sometimes had to skip meals — not because they weren’t careful with money, but because grocery prices rose faster than their budget, and they had to choose between paying for their medication and buying food. Through SNAP enhancements, they were connected to stable food support — and even provided with prepared meals through a community partner. Now they have food security, a better health outlook, and no longer have to ration meals in their own home.”
He pledged to continue efforts to fill the need for an estimated 50,000 affordable housing units; streamline the permitting and approvals process to get more homes built; continue to expand Hawaii’s tiny-home, homeless kauhale communities that will grow to 30 locations this year; and get more Native Hawaiians off of the state Department of Hawaiian Home Lands wait list for housing.
“We also have to return more homes to local families — including short-term rentals that have taken too many units off the market,” Green said. “So in the coming years, we will support the counties as they bring more short-term rentals back into the housing market — so that more homes go to local families, not absentee investors. We will deliver at least another 10,000 new homes this way.
“… Working with the Legislature, we delivered the most significant housing regulatory and zoning reforms in over 40 years — so we can keep building at the scale our people need,” Green said. “Today, these actions are paying off. We are building new housing in Hawaii at a scale not seen in decades.
“… Over the next decade, more than 20,000 additional homes are planned on state lands — and we are tracking over 62,000 housing units across more than 250 projects statewide, including 46,000 affordable homes.”
Green pledged to grow local jobs for future film and television productions in Hawaii by expanding “stackable film tax credits for productions that hire local crew and talent — with a proposal to remove the credit cap for large productions spending $60 million or more in Hawaii, including streaming service productions for the first time.”
And he wants to create more jobs in healthcare, energy, and education “— sectors where jobs are growing and where communities need workers. That’s the future we believe in and are working to build — a Hawaii where local kids don’t have to leave our islands to succeed, because we’ve invested in creating real opportunities here at home.”
Green touted America’s first “green fee” tax that went into effect Jan. 1 to help the state respond to climate change and better prepare for future disasters, especially wildfires.
“We will partner with schools and nonprofits to train the next generation of climate stewards — because the work of malama ‘aina belongs to all of us, now and forever,” Green said. “Our vision is for a Hawaii that leads the world in climate resilience — meeting our commitments and protecting our land, our water, and our way of life for future generations.”
