The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Human Services and Homelessness on Feb. 5, 2026.
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Feb. 5, 2026, 9:30 a.m.
Hawaii State Capitol
Conference Room 415 and Videoconference
To: House Committee on Human Services & Homelessness
Rep. Lisa Marten, Chair
Rep. Ikaika Olds, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
TESTIMONY IN OPPOSITION TO HB2010 — RELATING TO TAXATION
Aloha chair, vice chair and other committee members,
The Grassroot Institute of Hawaii opposes HB2010, which would establish a surcharge of 2% on taxable income in excess of $1,000,000 in order to provide funding for the state Medicaid program.
The intention of this bill might be noble, but a tax hike of this nature poses a threat to the state’s economy as a whole. While it might appear to affect only the wealthy, the downstream effects on job growth and opportunity will also impact middle- and lower-class residents.
A 2007 study of California’s income tax structure determined that legislated tax increases have a strong contractionary effect on the economy, with much of the negative effect coming through a decline in personal consumption and private domestic investment. The study found that a tax increase equal to 1% of GDP resulted in a 3% decline in GDP after three years.[1]
Thus, over the long term, a tax increase on high earners will harm the economy and local businesses. Meanwhile, the residents who would be directly affected by the tax are the ones with the resources to relocate or otherwise minimize its impact on them.
It would also not be wise to tie healthcare funding to a tax that might drop or fluctuate depending on the rate of outmigration and the vagaries of the economy. To do so creates potential budgetary issues that could threaten the long-term viability of the program.
The bill optimistically cites a similar surcharge in Massachusetts, stating that it has had no ill effects. However, that surcharge took effect in 2023, so it is far too early to fully gauge its overall impact on the economy and business climate.
Instead of attempting to address concerns about Medicaid funding through a tax on high earners, lawmakers should focus on ways to improve the delivery and administration of the Medicaid program in our state.
Thank you for the opportunity to testify.
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] Christina D. Romer and David H. Romer, “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks,” American Economic Review, June 2010, p.764.
