Money matters. As lawmakers attempt to set this year’s state budget, they are facing significant challenges. Cost projections for supporting families displaced by the Maui wildfires remain undetermined, with the price of temporary shelter programs spiraling far beyond original estimates. Gov. Josh Green recently requested $362 million in emergency funding to pay for disaster recovery efforts.

Departments are already bracing for a big hit when this year’s budget is finalized. Senators have asked administration officials to develop contingency plans that involve across-the-board spending restrictions of 10% to 15%. Such reductions would be devastating for public services. Our school system, for example, would experience a cut of up to $320 million in that scenario, undermining the learning growth of local children.

We cannot build a prosperous future on the bedrock of budget cuts. Despite the murky financial situation in which the state finds itself, elected officials should refrain from employing a philosophy of fiscal austerity to balance the state budget. Doing so will only diminish essential services for vulnerable communities and working families.

Instead, state leaders should adopt proposals that generate much-needed revenue by closing tax loopholes that disproportionately benefit wealthy taxpayers. The best remaining opportunity to accomplish this is expressed in House Bill 1660, which would tax capital gains at the same rate as ordinary income.

Capital gains are profits that are accrued from the sale of investments like stocks, bonds, real estate and art. Hawaii is currently one of only nine states that tax capital gains at a lower rate than ordinary income, according to the Center on Budget and Policy Priorities. This tax break overwhelmingly benefits our state’s wealthiest taxpayers, with 77% of long-term capital gains being earned by those earning at least $400,000 per year.

According to the Hawaii Department of Taxation, passing HB 1660 would generate $134 million in the next fiscal year, an amount that rises to $166 million by 2030. That revenue could be used to shore up public education, safeguard social services, strengthen Lahaina’s recovery, and expand wildfire prevention efforts across the islands.

At the same time, policymakers should oppose bills that would deplete state revenue by widening tax breaks for the rich. Two estate tax bills, HB 2652 and HB 2653, would dramatically expand estate tax exemptions by, respectively, extending the marital deduction to any immediate family member, conforming our local estate tax rate to federal levels; and establishing a deduction for the value of family-owned businesses.

The federal estate tax was sharply weakened under the Trump administration. Today, it applies only to estates worth roughly $5.5 million for a single individual and $11 million for a married couple. These bills would make Hawaii’s estate tax exemption the largest in the nation, at over $13 million for a single person and over $27 million for a joint filer.

As the Hawaii Children’s Action Network noted in its testimony on the proposals, less than 1 in 1,000 estates have been taxed at the federal level since Trump’s tax cuts went into effect. Yet, the Department of Taxation notes that HB 2652 (extending the marital deduction) would cost the state over $43 million in revenue, and said at a recent hearing that HB 2653 (family-business tax deduction) would cost at least $15.8 million, making these bills a nearly $60 million giveaway to the ultra-wealthy.

The state budget is often referred to as Hawaii’s primary policy document. If that’s the case, then legislators should create the funding necessary to sustain essential programs for future generations, rather than slashing services to benefit the financially privileged.

Kris Coffield is co-chairperson of the Democratic Party of Hawaii’s legislative committee.