05/28/2026
Hawaii Is Latest To Add "Millionaire's Tax"
The Land of Coconuts and Outrigger Canoes recently raised its top marginal income tax rate from 11% to 13%. This is a new tax bracket for single filers earning more than $500,000 annually.
Local lawmakers are calling it a “Millionaire’s Tax,” even though they're only off by half.
This nearly catches up with California’s 13.3% top rate and the combined New York state and city rate of 14.8%.
Honolulu lawmakers justified the increase by citing a budget gap, which is the usual justification for such increases. However, higher taxes generally lead to increased spending, which in turn prompts another call for higher taxes in the future.
Meanwhile, back at the ranch, the shrinking tax base only leads to larger budget gaps. According to calculations by Unleash Prosperity, the Aloha State has suffered from net domestic migration for years.
Hawaii is the third state this year to raise income taxes, following Washington and Maine.
The nine states with the highest current income tax rates, in order from highest to lowest, are California, Hawaii, New York, New Jersey, Oregon, Minnesota, Maine, Massachusetts and Washington. All of these states have one thing in common.
I'll give you 99 guesses as to what that is, as long as the first 98 don't count.
Let me leave you with this...
Massachusetts is seeing this as an opportunity rather than a crisis.
Talent from some of America's hottest artificial intelligence companies often passes through Boston-area universities before heading west to build billion-dollar businesses in the Silicon Valley. Political and business leaders in Massachusetts are saying that California's proposed tax on billionaires is an opportunity for change.
Of the 20 most valuable venture-backed U.S. AI companies, half have co-founders who attended MIT or Harvard, according to PitchBook data. And none of them are headquartered in Massachusetts.
The state has struggled to leverage what should be a built-in advantage regarding the AI boom powering much of the nation's economic growth. The higher concentration of investors in California, particularly those focused on early-stage funding, is a major motivator for western movement.
But that math could change if California moves ahead with a proposed one-time 5% wealth tax on individual assets of more than $1B. This would be a tax based on what a company is worth, whether it was sold or not.
Firms can be worth billions on paper, potentially leaving founders with huge tax bills and limited liquidity to pay them. Many founders might even end up bankrupt as a result.
Massachusetts Governor Maura Healey has been pitching the case for the state directly to Silicon Valley executives and investors. This seems ridiculous given that Massachusetts' top income tax rate is 9% on incomes exceeding $1,083,150.
Why isn't Illinois pitching these California founders and executives? There's plenty of VC Capital here for any start up and a flat income tax rate of 4.95%.
Of course, our state lawmakers can't even keep a professional football team that's been here for 105 years, so why would they ever consider making the time?
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