In the spring of 2024, Hawai‘i did something unusual: It cut income taxes.
Its backers called it the largest income tax cut in state history. A family of four earning the median household income of $91,000 would see their tax bill drop by 69% by 2031.
Rep. Kyle Yamashita, then House Finance chair, called it “a foundational piece in restructuring our tax code.” For once, the language wasn’t empty — because Yamashita had a plan.
Hawai‘i has some of the lowest property taxes in the nation — low enough, he argued, to draw out-of-state buyers in. About 30% of homes statewide are owned by outside buyers, he said, driving up prices and pushing local families out. The problem? The state doesn’t control property taxes. Counties do. And counties, facing their own pressures, weren’t going to raise them on their own.
At a public hearing, Yamashita suggested cutting off the GET surcharge revenue the state shares with the counties: “We stop giving the counties money, and then they have to make that shift.” The cut wasn’t only relief for working families. It was the opening move in a longer game — starve state revenue, force spending cuts, and squeeze the counties into doing what the Legislature couldn’t: raise property taxes.
The plan rested on a quiet bet that Yamashita would still be Finance chair when it came time for Step Two.
Then House Speaker Scott Saiki lost his primary to Kim Coco Iwamoto in August 2024.
When Nadine Nakamura took the speakership, the factions that had kept Yamashita in place shifted around him. Rep. Chris Todd replaced him as Finance chair. The memo offered no reason, only that “the House has decided to move in a new direction.” Todd said “basic math” meant lawmakers would have to recoup the lost tax revenue.
Governor Green wants to repeal the last five years of the cuts, keeping roughly $1.8 billion in state revenue. The House passed his bill 39 to 11. The Senate has held firm. Ways and Means Chair Donovan Dela Cruz called the 2024 cuts “landmark legislation” while noting the changed fiscal picture — and a clash between the two chambers is coming.
Hawai‘i has been here before — the state passed an income tax cut in 1998. Then came the Great Recession. In 2009, lawmakers reversed the cuts. The pattern holds: the first thing cut when revenues fall is whatever tax relief was promised last.
Yamashita’s read on the tax structure was correct as far as it went. Hawai‘i taxes income hard and property lightly — a levy on people who work here and a break for people who park wealth here.
But the reason the state taxes heavily and the counties lightly is because PreK-12 education is handled at the state level. Hawai‘i is the only state with a statewide school district. We’re budgeting around $2.6 billion for that district this year. All other states handle education at the county level. The most direct path to reform runs through education.
Yamashita saw the bind: the state had to shed power to the counties — starting with education — or find new ways to tax. But his solution was naive. A state income tax cut was never going to shrink state government. It was going to produce exactly what happened: A push to reverse the cuts and hand the state new taxing power over real estate.
The state constitution gives property tax power to the counties and assigns education to the state — two provisions that sit on opposite sides of the same problem. Changing those provisions takes a constitutional amendment or a constitutional convention. That is a long, hard fight. It needs staying power that Hawai‘i’s shifting politics cannot provide.
Yamashita’s removal proved something. Reform depends less on good ideas than on staying power. The people pushing reform have to outlast it, or the next person through the door reverses it.
In any policy fight, the temptation is to find the right champion and trust the outcome to him. Hawai‘i is more prone to this than most. It’s a small state where a few chairs hold great power, and one upset can shuffle the whole deck. We look to princes because the system makes princes look powerful. But the psalmist had seen enough throne rooms to know how that ends: Put not your trust in princes, in a son of man, in whom there is no salvation. When his breath departs, he returns to the earth; on that very day his plans perish.
Lawmakers who voted for those cuts owe their voters something: cut spending first. The harder talk still needs to happen — a constitutional amendment, or a constitutional convention. That’s the only path to reform that doesn’t depend on one chairman keeping his seat.
