Divergent Legislative Agendas: House Pushes Tax Revenue; Senate Focuses on Housing & Affordability

The upcoming 2026 legislative session in Hawaiʻi is poised to present a significant divergence in policy approaches between the State House and Senate, particularly concerning state revenue and economic development strategies. While the House Majority has explicitly identified "Enhancing Tax Revenue" as a priority, indicating a potential for increased taxes or fees impacting businesses and residents, the Senate Majority's agenda prioritizes housing affordability, workforce development, and economic diversification without direct mention of tax increases. This split necessitates immediate strategic review by businesses operating in Hawaiʻi.

The Change

As the Hawaiʻi State Legislature reconvenes on January 21, 2026, the announced priorities reveal contrasting visions for the state's economic future. The House’s stated goal to "responsibly strengthening the state’s revenue base" through "responsible revenue strategies" signals a proactive stance on increasing state income, potentially through new or expanded taxes, fees, or levies. Conversely, the Senate Majority’s agenda focuses on alleviating cost pressures for residents and businesses through measures like streamlined housing development, tax credits, GET exemptions for specific sectors, enhanced workforce training, and targeted investments in emerging industries. The Senate’s approach appears geared towards economic growth and cost reduction without directly increasing the state's tax burden.

Who's Affected

Small Business Operators

Small business owners face a bifurcated outlook. The House's priority to "enhance tax revenue" could translate into higher operating costs through increased general excise tax (GET), income tax, or specific business levies. This could compress already thin margins. Simultaneously, the Senate's agenda may offer opportunities: increased investment in workforce development could ease talent acquisition challenges, while a focus on housing development and economic diversification could spur demand for services and create new markets. Entrepreneurs and startups may find incentives for emerging industries appealing, but must also brace for potential headwinds from broader tax increases.

Real Estate Owners

Property owners and developers are central to the Senate's ambitious housing agenda, which includes streamlined development processes, financial subsidies, tax credits, and GET exemptions for affordable housing projects. This could accelerate new construction and potentially increase property values in targeted areas. However, if the House successfully implements new revenue-raising measures, property taxes or business taxes levied on real estate-related businesses could rise. Landlords might also face increased compliance costs if the Senate modernizes the landlord-tenant code.

Investors

Investors will need to closely monitor the legislative outcomes. A House-driven increase in state revenue could signal a broader fiscal tightening, potentially impacting consumer spending and overall economic growth. Conversely, the Senate's focus on economic diversification and specific sector incentives (e.g., advanced manufacturing, technology, housing development) could create targeted investment opportunities. Venture capital and angel investors should evaluate which legislative pathway aligns best with their portfolio strategies, paying attention to funding for startups and emerging industries.

Entrepreneurs & Startups

Startups and entrepreneurs could benefit significantly if the Senate’s agenda prevails, particularly in areas like technology-driven industries, advanced manufacturing, and regional economic development initiatives. Targeted tax incentives mentioned by both chambers could also provide critical support. However, if the House’s revenue enhancement measures are enacted broadly, startups may face increased tax burdens during their critical growth phases. Access to funding and talent pipelines, areas of focus for both chambers, will remain crucial.

Agriculture & Food Producers

While the Senate prioritizes food security, farm-to-table programs, biosecurity, and agricultural infrastructure, the House's revenue-raising agenda could indirectly impact the sector. Increased GET on supplies or transportation could raise input costs for farmers and food producers. Conversely, the Senate's mention of workforce recruitment for young farmers and agricultural viability policies offers potential support. Businesses involved in circular economy practices and recycling (HI-5 program) may also see policy alignment with the Senate's environmental focus.

Healthcare Providers

Healthcare providers might see policy advancements from the Senate on telemedicine expansion, provider recruitment, and support for a medical residency program. However, the Senate’s plan to mitigate federal funding reductions for programs like Med-QUEST could signal increased administrative focus or potential shifts in provider reimbursement. The House's revenue focus could indirectly affect health care through broader economic impacts or, if specific healthcare-related taxes are proposed, directly impact operational costs.

Second-Order Effects

If the House prioritizes tax revenue increases, this could lead to higher operating costs for businesses → reduced consumer discretionary spending → slower growth in sectors reliant on local demand (e.g., retail, restaurants) → increased pressure on wages as businesses try to offset costs.

Conversely, if the Senate's housing initiatives are successful, streamlined housing development → increased construction activity and related services → higher demand for labor in construction and trades → potential upward pressure on wages in these sectors → increased demand for rental properties, potentially stabilizing or increasing rental rates in the short-to-medium term.

What to Do

For Small Business Operators:

Act Now: Begin modeling the impact of potential tax increases on your profit margins. Review your business plan to identify which Senate priorities (e.g., housing development partnerships, workforce training programs) could offer opportunities for growth or cost savings. Prepare to adjust pricing strategies or seek new efficiencies before the 2026 legislative session leads to concrete policy changes, particularly if House revenue proposals gain traction.

For Real Estate Owners:

Act Now: If involved in development, engage with county and state housing agencies to understand how Senate proposals for streamlined processes and incentives might apply to your projects. For all property owners, monitor legislative discussions regarding potential property tax adjustments or new business levies. Update lease agreements to account for potential increases in operating expenses, both from taxes and inflation.

For Investors:

Watch: Track legislative developments closely, particularly regarding the specifics of any tax revenue enhancement measures proposed by the House and the allocation of funds for the Senate's economic diversification and housing initiatives. Adjust investment theses to align with potential policy shifts. Consider increasing due diligence on companies that may be directly impacted by new tax structures or those poised to benefit from targeted incentives.

For Entrepreneurs & Startups:

Act Now: Assess how potential new tax structures could affect your business model and funding requirements. Concurrently, explore how Senate initiatives supporting emerging industries, advanced manufacturing, and technology can be leveraged for grants, incentives, or partnerships. Engage with industry associations that advocate for startup-friendly policies.

For Agriculture & Food Producers:

Watch: Monitor discussions around agricultural infrastructure funding and workforce development from the Senate. Concurrently, be prepared for potential increases in the cost of supplies and transportation if the House’s revenue-enhancing measures include broad-based tax increases affecting business inputs.

For Healthcare Providers:

Watch: Focus on opportunities related to telemedicine expansion and provider recruitment initiatives outlined by the Senate. Stay informed about potential changes to state funding for programs like Med-QUEST that could affect reimbursement or patient access. Be aware of how broader economic impacts from tax policies might influence healthcare demand or operational costs.