Hawaiʻi wealth flight fears are overblown
Opponents of Hawaiʻi’s new millionaire tax have a familiar warning: raise taxes on the rich, and they’ll leave. A recent “Island Voices” column made this argument, suggesting that if just 10 of the roughly 2,000 taxpayers affected by the new bracket moved to Florida, the state could lose more than the tax raises (“State ‘millionaire tax’ might backfire,” Star-Advertiser, July 8).
It’s worth examining that claim against the evidence.
This past legislative session, Hawaiʻi added a new top marginal income tax rate of 13 percent on income over $1 million. The bracket is expected to raise over $100 million a year from about 2,000 filers—roughly 0.2 percent of Hawaiʻi taxpayers.
For the tax to backfire as critics claim, the 10 wealthy, fleeing households would each need to owe roughly $10 million a year in Hawaiʻi income tax, with incomes approaching $100 million per household. That’s not a realistic scenario. It’s a hypothetical built to scare, not to inform.
The most comprehensive study to date, published last year in the American Journal of Sociology, examined IRS records for every top earner in America from 2016 through 2023—a period that included the 2017 federal tax overhaul and the pandemic. The researchers found that large tax increases did not lead to more tax migration. In fact, millionaires tend to move less than the general population.
Massachusetts offers a direct test case. In 2023, voters approved a 4 percent surtax on income over $1 million, taking the state’s top rate to 14 percent—higher than Hawaiʻi’s new 13 percent bracket. Opponents predicted an exodus. Instead, the surtax brought in $2.2 billion in its first full fiscal year, growing to nearly $3 billion in 2025 and over $3.1 billion in 2026. And in the first year after passage, fewer of Massachusetts’ highest earners left—the number dropped from 9,735 to 8,676.
As one analyst put it: If the millionaires were leaving, they wouldn’t keep paying the tax.
The reality is that millionaires have deep ties to their communities—their businesses, their relationships, their lives. NVIDIA CEO Jensen Huang, asked about California’s proposed billionaire tax, put it simply: “I have not even thought about it once. We chose to live in Silicon Valley, and whatever taxes I guess they would like to apply, so be it. I’m perfectly fine with it.”
When Hawaiʻi’s Legislature took testimony on a suite of tax-fairness bills this session, 917 submissions supported them and 250 opposed. On the bill that became law, the final hearing ran 29 in support to 11 opposed — and 9 of the 11 objections were about sections repealing business tax credits, not about taxing income over $1 million.
Supporters were clear about why this matters: 70 percent of long-term capital gains flow to households earning over $400,000, and those households pay a maximum of just 7.25 percent on those profits. Federal changes threaten more than $1.2 billion in Medicaid support. And the lowest-income households in Hawaiʻi pay a higher share of their income in state and local taxes than the wealthiest do.
The revenue from this new millionaire’s income bracket will fund the priorities—housing, schools, healthcare—that make Hawaiʻi more affordable for everyone.
The evidence points only one way: Top earners stay where their lives are rooted. And Hawaiʻi has plenty to keep them here.
