Why Hawaii residents are moving away

State taxes a major driver of the exodus

Hawaii Together with Keli'i Akina with guest Dan Mitchell June 21, 2021

Hawaii is a wonderful place with a terrific natural environment, but a good climate works in a state's favor for only so long

If you want to know why people are leaving Hawaii, there is possibly no better person to ask than economist Dan Mitchell, co-founder of the Center for Freedom and Prosperity in Washington, D.C., and an international expert on the effects of government taxation and spending policies.

Mitchell was the guest on Keli'i Akina’s June 21, 2021, “Hawaii Together” program, which sought to explain “Why Hawaii residents are leaving Hawaii.”

Mitchell noted that in the past, a major reason to move was to enjoy sunnier, warmer climates, especially for retirees, which helped explain the population growth of states such as California, Nevada, Arizona and Florida.

“But what we’re really seeing in a much more pronounced way in the last couple of decades,” he said, “and really probably accelerating in just the last couple of years, is … people … moving for tax reasons, both directly and indirectly.”

By directly he meant people who specifically want to pay lower taxes, such as investors, entrepreneurs and small business owners. By indirectly, he meant people who are looking for jobs — “and the jobs tend to be where taxes are lower and there’s a more business-friendly economic environment.”

Of course, Hawaii is a special case, with a great natural environment. But a good climate works in a state’s favor for only so long.

“Probably the best climate, certainly in the continental United States, is California,” Mitchell said. “California used to be the great place to go because you didn’t have the humidity of Florida, you had the cool nights, all sorts of things that made it a magnet.… Yet, California is now suffering out-migration.

“Now, I don’t want to pretend it’s all due to tax policy — and maybe this is actually an issue for Hawaii: There are very restrictive building rules in California, and that means that the existing housing stock becomes very expensive because the politicians aren’t letting new homes get built. … Unless you want to move to some very isolated part of the state, you’re going to be much better off moving to Texas, which a lot of California entrepreneurs have done, [or] moving to south Florida, which is now becoming a high-tech hotspot because of all the California tax exiles.

“There’s direct and indirect effects of all these things,” he continued. “We want to be careful not to say it’s one factor that’s always the key deciding for us in every single case. But on net, boy, you don’t want to have high taxes, you don’t want to have anti-housing rules, and a lot of states are making these mistakes.”

Watch the full interview and find out what else Mitchell had to say that helps explain Hawaii’s recent exodus of both capital and labor.