Senators took testimony and discussed policy and equity implications of a proposal to raise Hawaii’s top capital-gains rate and to consider taxing capital gains at the same rate as ordinary income.

Witnesses in support included Melvin Thomas of Hawaii Appleseed, who said roughly 80% of long-term capital gains accrue to taxpayers earning over $400,000 and argued the existing preferential treatment benefits wealthy taxpayers. Nicole Wu of Hawai‘i Children’s Action Network and Tom Yamachika of the Tax Foundation also testified, offering written testimony and analysis. Witnesses urged either raising the capital-gains rate or aligning capital-gains taxation with ordinary income rates to close perceived loopholes.

Opponents and questioners raised concerns about effects on middle-income residents who invest, kupuna downsizing primary residences, and the state’s competitiveness for investment. Committee members asked whether the bill contained exemptions for downsizing seniors; a taxation representative confirmed existing federal-conforming exclusions for sale of a primary residence remain in place (currently $250,000 per individual, $500,000 for joint filers), but the bill would change the capital-gains rate applied to other gains.

Testimony pointed to tax-distribution data showing capital-gains income is concentrated among high earners and nonresidents, which supporters said made the proposal targeted. Lawmakers sought clarification on who would be affected; witnesses acknowledged broad effects while noting most revenue would likely come from higher-income filers. The record shows robust public input both for and against the proposal; the committee proceeded to the next items after testimony.