May '26
May's "Let's Talk Story" featured special guests Tom Yamachika and Ted Kefalas, who educated the community members about new and existing legislation that could impact taxes.
Tom and Ted "Talk Story" about Taxes
May's "Let's Talk Story" meeting focuses on state tax policy, affordability, and the 2025 legislative session, with detailed discussion of Senate Bill 3125 and related measures affecting income tax cuts, renewable energy credits, special funds, and business incentives. Speakers from the Tax Foundation of Hawaii and the Grassroot Institute break down how the bills work, why some tax hikes failed, and how transparency, spending cuts, and regulatory reform could better address Hawaii’s high cost of living.
Ted Kefalas- Grassroot Institute
Ted Kafalas of the Grassroot Institute opened by describing the major theme of the session- lawmakers who repeatedly claimed there was not enough money to fund essential services, leading them to introduced a large number of tax bills. He said the session included proposals to raise income taxes, capital gains taxes, and conveyance taxes, and that most of these tax hike bills, except Senate Bill 3125, had died. Ted argued that taxes are one of the few tools legislators can directly use to improve affordability, but he criticized the pattern of trying to solve budget problems by raising revenue instead of cutting spending. He also emphasized that Hawaii has a habit of hiding money in special funds, pointing to the University of Hawaii tuition and fee special fund, which had $430 million unencumbered and was not touched despite criticism.
Tom Yamachika- Tax Foundation of Hawaii
Tom Yamachika of the Tax Foundation of Hawaii expanded on the issue of hidden or unused state money, saying lawmakers should look for money that already exists before asking taxpayers for more. He explained that some special funds hold large amounts of money and are not always clearly used, which makes it difficult for the public to know whether those funds are really needed. Tom also helped explain the tax system itself, especially the difference between taxable income and gross income, and how Hawaii’s income tax uses marginal tax brackets. He clarified that under SB 3125, the tax cuts would continue for most people, but certain higher-income brackets would be paused, and he stressed that because the system is marginal, people above the thresholds would still get some benefit on lower portions of their income.
Ted and Tom spent a large part of the discussion on Senate Bill 3125, explaining how it evolved during the legislative process and how it affected both personal income taxes and business-related tax credits. Ted said the final version still preserved most of the tax cuts for people earning under 175,000 as single filers or 350,000 as joint filers, while Tom explained that the bill would phase out the renewable energy tax credit starting in 2027 and place a 40 million cap on that credit statewide. They also explained the capital goods tax credit, which helps businesses recover part of the tax paid on equipment and other tangible purchases,making it especially important for small business owners. Joe Gedeon voted "no" on the bill because he believed the state should keep the promise it made when those tax cuts were first passed, and because the bill also created a new $131 million.
Ted and Tom then reviewed several dead bills and why they worried people. Ted discussed HB 2329, the conformity bill, which adopts some federal tax changes but not others: Hawaii will conform to no tax on tips, but not overtime pay or car loan interest, and it will not fully match federal deductions or depreciation rules. Tom explained that the state can choose what to conform to because Hawaii and the federal government are separate systems. They also covered SB 3028 on conveyance taxes, which could have raised taxes dramatically on higher-priced homes and redirected money to Hawaiian Homelands, and HB 2010, a wealth asset tax that would have taxed personal wealth year after year. They criticized HB 2030, which would have added a tax on car sales but had blank tax rates, and HB 1850, which would have raised capital gains taxes and pushed investors away. Other rejected ideas included a barrel tax, a state property tax, a tax on concert tickets, and a bill to abolish the gas tax. Ted and Tom said lawmakers should instead focus on regulatory reform, transparency, and eliminating wasteful spending. They also discussed SB 2921, which raided 18 non-general funds for $47 million, though both said that was only a small step compared with the amount of money hidden in special funds.
The session ended with audience questions about the Jones Act, cruise ship tax litigation, legislative pay, and whether anyone tracks lawmakers’ positions on spending and taxes. Ted and Tom explained that many of these issues are complicated by politics, supermajority control, and limited transparency, but they stressed that residents can still make their voices heard by contacting the governor and staying involved. Ted and Tom were very informative to our community, and helped make sense of thousands of bills and complex tax proposals.
