Hawaii’s 9th Worst State Business Tax Stifling Recovery
Last week the Small Business & Entrepreneurship Council (SBE Council) published the “Business Tax Index 2011: Best to Worst State Tax Systems for Entrepreneurship and Small Business” and Hawaii ranked 43rd out of 51, including the District of Columbia.
As elected officials struggle with budget shortfalls this year, this report makes it clear that a competitive tax system helps small business to grow and the economy to thrive. Small businesses grow and jobs are created where investment and capital can be attracted, and Hawaii’s heavy tax burden on business is stifling recovery.
“Higher taxes have an impact on a state’s competitiveness. There is a reason why low tax states are better able to attract investment. In many states, elected officials continue to propose tax increases – and actually raise them – in order to fund out-of-control government spending. High levels of spending translate into increased tax burdens on the entrepreneurs and investors who drive economic growth and job creation,” said Raymond J. Keating, chief economist for SBE Council and author of the report, in a written statement.
The index ranks the 50 states and District of Columbia according to the costs of their tax systems for entrepreneurship and small business. “Business Tax Index 2011” pulled together 18 different tax measures, and combines those into one tax score that allows the 50 states and District of Columbia to be compared. Among the taxes included are income, capital gains, property, death/inheritance, unemployment, and various consumption-based taxes, including state gas and diesel levies.
Included in the report, was the fact that Hawaii tied last for highest personal income tax rates, along with the District of Columbia. State personal income tax rates affect more than just individual economic decision-making but business decision-making as well. As the report points out, more than 92 percent of businesses file taxes as individuals (e.g., sole proprietorship, partnerships and S-Corps.), and pay personal income taxes rather than corporate income taxes.
Keating added: “State and local taxes affect the decisions made by entrepreneurs, investors, businesses and individuals. Several states in recent years have hiked taxes in response to excessive government spending, and declining revenues in a down economy. In high-tax states, elected officials have refused to cut spending or slow its growth. The implications for entrepreneurship, small businesses, competitiveness, investment and employment are significant.”
According to the “Business Tax Index 2011,” the 15 best tax systems are: 1) South Dakota, 2) Texas, 3) Nevada, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8)Alaska, 9) Ohio, 10) Colorado, 11) South Carolina, 12) Mississippi, 13) Oklahoma, 14) Virginia, and 15) Missouri.
The 15 worst state tax systems are: 37) Illinois, 38) North Carolina, 39) Nebraska, 40) Connecticut, 41) Oregon, 42) Rhode Island, 43) Hawaii, 44) Vermont, 45) California, 46) Maine, 47) Iowa, 48) New York, 49) New Jersey, 50) Minnesota and 51) District of Columbia.
Other notable Hawaii rankings among the states included in the report were:
- Top Capital Gains Tax Rates: 40th
- Corporate Income Tax Rates: 20th
- Top Corporate Capital Gains Tax Rates: 7th
- State and Local Property Taxes: 10th
- State and Local Sales, Gross Receipts and Excise Taxes: 51st
- Adjusted Unemployment Taxes: 43rd
- State Gas Taxes: 49th
- State Diesel Taxes: 50th
- State Wireless Taxes: 14th