HAWAII
Relative to Population
Total
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Net gain/loss of residents: −8,896
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Net gain/loss of tax returns: −3,350
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Net gain/loss of AGI: $0.35 billion
Taxes and Interstate Migration: 2024 Update
from Tax Foundation, September, 2024 (excerpts)
…One reason policymakers should care about their state’s interstate migration patterns is the effect of interstate migration on tax revenue, economic output, and economic growth over time. Between 2021 and 2022, most states that experienced a net loss in income tax filers attributable to interstate migration also experienced a net loss in income associated with interstate migration, while most states that gained taxpayers also experienced corresponding gains in AGI.
Hawaii and Mississippi were among the states that lost residents on net and yet experienced a net gain in AGI, with new residents bringing in higher AGI per return than departing residents. Meanwhile, four states—West Virginia, Oregon, Washington, and Missouri—saw a net gain in income tax filers but a net loss in AGI, with new residents earning less on average than the people who moved out. Some of this is due to cost-of-living adjustments that tend to occur when individuals leave employment in one state for employment in another. For example, even if their job duties are substantially similar, a registered nurse employed in a high-cost-of-living state is likely to have a higher salary than one employed in a lower-cost-of-living state due to cost-of-living considerations that affect market rate earnings in different parts of the country.
There is evidence, however, that in states like Hawaii, the loss of relatively lower-income residents is somewhat attributable to high taxes and high costs of living causing lower- and middle-income residents to seek more affordable destinations elsewhere. Notably, four of the top five states Hawaii residents moved to—Texas, Washington, Nevada, and Florida—forgo individual income taxes on wage income. Likewise, some of the increase in relatively lower-income residents in Indiana, Kentucky, and Missouri is likely due to the relatively low cost of living in those states compared to other locations. Crucially for economic growth, however, a low-tax environment may encourage investment and entrepreneurial decision-making and attract highly mobile higher earners as well….
Each year, the IRS releases migration data showing the movements of income taxpayers based on changes in their mailing address between filing one year’s income tax return and the next. The most recent data generally show location changes that occurred between when taxpayers filed their tax year 2020 returns in calendar year 2021 and when they filed their tax year 2021 returns in calendar year 2022. These data, therefore, capture many of the interstate moves made during and in the aftermath of the COVID-19 pandemic….
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