Hawaiʻi lawmakers advance capital gains tax increase

The capital gains tax is imposed on the profits from sales of capital assets such as houses, stocks, bonds or jewelry. The current top capital gains tax rate is 7.25 percent, which critics point out is a lower tax rate than many Hawaiʻi residents pay on their wages and salaries.

A new version of HB 133 as amended in the Ways and Means Committee on Monday would increase the top capital gains tax rate to 9 percent for individuals, and increase the top rate from 4 percent to 5 percent for corporations.

The House draft of the same bill features the same rate increase for individuals, but would not increase the corporate capital gains rate.

The measure is supported by the Hawaiʻi State Teachers Association, and both the education and labor caucuses of the state Democratic Party of Hawaiʻi.

“The federal Tax Cuts and Jobs Act gave a tremendous tax break to literally the richest among us,” HSTA wrote in its testimony to lawmakers. “The state can now recapture some of those federal tax savings by raising the percentage of our state tax on capital gains.”

The extra money from the capital gains rate increase “will bring revenue into our state to support our social services that provide necessary support to those experiencing … homelessness, domestic violence, lack of basic needs, mental illness, and other rising community issues exacerbated by the pandemic,” wrote Christy MacPherson, director of a coalition of social service organizations called PHOCUSED Hawaiʻi.