Report: Recent tax changes improve Hawaii's economic outlook

by Kim Jarrett, The Center Square, April 10, 2024

(The Center Square) - A change in Hawaii's tax codes bumped the state economic outlook score up from 42 to 41 in the 2024 Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index.

The report, published annually, ranks states' economic outlook based on 15 metrics.

Tax changes made in 2022 and 2023 reduced the personal tax burden on $1,000 of Hawaii residents' personal income by $3.46.

Still, Hawaii's tax burden remains higher than other states. The personal tax income rate is 11%, which ranks 46th among the 50 states. The corporate tax burden is 6.4%, which places it 24th.

Hawaii's sales tax burden is $42.04 per $1,000 of personal income, which is 49th. The Aloha State fares better with its property tax burden at $26.87 per $1,000, ranking 24th. The remaining tax burden is $20 per $1,000, according to the report.

The state faces migration challenges with 105,552 people leaving Hawaii between 2013-2022, which places 37th among the states, according to the report. The migration data is a factor in the state's 46th ranking in economic performance.

Gov. Josh Green addressed the tax and migration issues in his policy brief issued last month. One of his solutions is indexing the state's income tax for inflation, he said.

"Hawaii is one of the only states in the country that does not index income brackets with inflation," Green said in the brief. "This means that households are subjected to an implicit tax increase due to inflation. The present system requires that households pay more in individual income taxes even though the purchasing power remains the same—or even declines."

Housing costs are also forcing people to leave the state, according to Green's brief.

"In 2023, Hawaii lost an additional 4,000 residents, bringing the net loss to a total of 22,000 residents since 2019. — people who lived, worked, and contributed to the Hawai‘i’s economy and society," Green said in his brief. "The exodus corresponds to a dark milestone in Hawaii’s history for the state’s indigenous people. For the first time since a government census was conducted in 1850 under King Kamehameha III, a majority of the world’s Native Hawaiian population lives outside the Hawaiian Islands."

The Hawaii Legislature is considering a bill to ease the housing crisis.

House Bill 2090 would make it easier to construct residential units in commercial areas. It was sent back to the Senate on Tuesday with House amendments.

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ALEC: Hawaii - State Economic Profile - Rich States, Poor States (richstatespoorstates.org)

ALEC: Rich States, Poor States (richstatespoorstates.org)