State of the Week: HAWAII – Big Tax Hike Spoils Paradise for Small Businesses and Economic Opportunity

By at 13 October, 2017, 10:54 am

by Raymond J. Keating-

Small Business Policy Index 2017: Hawaii ranked 45th among the 50 states.

SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2017: Hawaii ranked 45th among the 50 states.

SBE Council’s “Small Business Tax Index 2017” ranks the states according to 26 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

Not a Tropical Paradise for Entrepreneurs and Small Businesses 

Hawaii might rank as a tropical paradise, but it’s anything but paradise when it comes to public policies that impact entrepreneurship, small business and investment. And the situation became a good deal worse with Governor David Ige (D) signing a massive tax increase into law in July.

Hawaii already ranks poorly on SBE Council’s “Small Business Policy Index” and “Small Business Tax Index” – coming in 45th, or sixth worst, on both.

Unfortunately, the tax increase signed by Ige will make the state far more costly and non-competitive.

Personal income tax rates will rise by significant amounts at the end of this year on income earners making more than $150,000 annually (filing single). Marginal income tax rates increase from 8.2% to 9.0% for those earning between $150,000 and $175,000, to 10% for those earning $175,000 to $200,000, and to 11% for those earning above $200,000.

These tax increases will drain resources from the private sector only to be doled out by politicians; discourage entrepreneurship and investment in the state; and make the state far less competitive. That combination means less economic opportunity for all.

Indeed, all other things being unchanged, this tax increase will drop Hawaii from 45th to 48th on the “Small Business Policy Index,” and from 45th to 47th on the “Small Business Tax Index.”

The lyrics to the Beach Boys’ song “Hawaii” begin: “Do you wanna go straight to Hawaii?” Well, for the beaches and the weather, “yes.” But when it comes to burdensome public policies, the answer is, unfortunately, “no.”


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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