Gov. Green’s proposed budget calls for $1.8B election-year tax increase

The state budget department confirms that the increase would come from a ‘pause’ of the remaining historic 2024 income tax reductions

News Release from Grassroot Institute, Jan 2, 2026

HONOLULU, Jan. 2, 2026 >> Gov. Josh Green’s latest budget proposal includes a tax increase of $1.8 billion for the fiscal years 2028 to 2031, accompanied by a $1.8 billion spending increase during that same time frame,[1] according to an email response from the state Department of Budget and Finance.

Responding to an open records request filed by the Grassroot Institute of Hawaii, the department confirmed that the $1.8 billion of “other revenues” — as stated in Green’s proposed budget, pictured below — “represents the Governor’s plan to pause all the remaining individual income changes from the 2024 Tax Cut beginning Jan. 1, 2027.”

Jan. 1, 2027 is the beginning of tax year 2027, while fiscal 2028 for the state starts six months later on July 1, 2027.

The governor’s proposed $1.8 billion of spending appears in the category of “specific appropriations/CB,” which is a category typically used for irregular spending items or “collective bargaining” such as increases in salary or benefits for public union employees.

The budget department has not yet responded to an open records request from the Grassroot Institute asking to clarify the details of this category of spending.

Above, Gov. Green's state budget for fiscal years 2025 through 2031 showing $1.8 billion of “Other revenues” and $1.8 billion of “Specific appropriation/CB.” Red circles added by the Grassroot Institute of Hawaii.

Perhaps not coincidentally, Hawaii’s 15 public collective bargaining units completed new agreements with the state spanning fiscal years July 1, 2025 through June 30, 2029,[2] but those contracts have not yet been made available to the public.

The state Department of Human Resources Development has not yet responded to an open records request from the Grassroot Institute asking for details about those contracts.

Joe Kent, Grassroot executive vice president, noted that it would take legislative aproval to “pause” the state income tax cuts that are scheduled to be phased in through 2031 and expected to save Hawaii taxpayers up to $7 billion over the entire phase-in period.[3]

He said: “It’s unusual for the governor to include in the budget future tax revenues that haven’t even been formally proposed or considered by the Legislature. This seems to presume that many legislators are eager to pass a major tax hike in an election year.”

Kent said rather than “pausing” any of the remaining phase-ins of what was widely hailed as the largest personal income tax cut in Hawaii history, state lawmakers should look for ways to reduce spending.

He said that because the governor’s proposed spending increases would happen in future years, there is still time to limit that spending without passing a tax increase in the current legislative session.

“One way to avoid a tax hike,” he said, “would be to limit future spending increases to a modest 1% to 2% increase per year.”

Another way, he said, would be for the governor to “require that all state departments reduce their spending by 10% to 15%, as has been done in the past, or simply for the Legislature to reduce spending altogether, which is long overdue.”

Kent said that since 2022 there has been a 5% “contingency” spending restriction and a 5% “hard” spending restriction, resulting in $1.9 billion in savings over the past four years.[4]

The “contingency” restriction allows for more spending if more monies are available, whereas the “hard” restriction does not.[5]

---30---

FOOTNOTES:

[1] Gov. Josh Green, "The FY 2027 Executive Supplemental Budget, Department of Budget and Finance," Dec. 22, 2025, p. 3, which shows “lapses” of $533.1 million for fiscal 2025 and an estimated $250 million for fiscal 2026.

[2] “Public Employee Exclusive Representatives,” Hawaii Department of Human Resources Development, accessed Jan. 2, 2026.

[3] Seth Colby, “Council on Revenues DOTAX Presentation,” Hawaii Department of Taxation, March 2025, p. 9.

[4] Gov. David Ige, "Executive Memorandum 22-23," Hawaii Department of Budget and Finance, Aug. 22, 2022; Gov. Josh Green, "Executive Memorandum 23-05," Hawaii Department of Budget and Finance, Aug. 15, 2023; Gov. Josh Green, "Executive Memorandum 24-04," Hawaii Department of Budget and Finance, Sept. 17, 2024; Gov. Josh Green, "Executive Memorandum 25-03," Hawaii Department of Budget and Finance, Aug. 18, 2025; Gov. Josh Green, "The FB 2023-25 Executive Biennium Budget," Hawaii Department of Budget and Finance, Dec. 19, 2022, p. 3 which shows “lapses” of $177.2 million of unspent monies in fiscal 2023; Gov. Josh Green, The FY25 Executive Supplemental Budget, Hawaii Department of Budget and Finance, Dec. 18, 2023, p. 3, which shows “lapses” of $347.3 million of unspent monies in fiscal 2023; Gov. Josh Green, "The FB 2025-27 Executive Biennium Budget," Hawaii Department of Budget and Finance, Dec. 16, 2024, p. 3, which shows “lapses” of $863.3 million in fiscal 2024; and Gov. Josh Green, "The FY 2027 Executive Supplemental Budget, Department of Budget and Finance," Dec. 22, 2025, p. 3, which shows “lapses” of $533.1 million in fiscal 2025 and an estimated $250 million in fiscal 2026.

[5] Gov. Josh Green, "Executive Memorandum 25-03," Hawaii Department of Budget and Finance, Aug. 18, 2025, p. 3, which states that “The contingency restriction is intended as a contingency reserve for FY 26 and may be adjusted during the second half of the fiscal year based on actual tax collection trends and the COR’s [state Council on Revenue’s] updated forecasts later in the fiscal year.”