Taxing Paradise

To many people, Hawaii, with its sand, surf and beautiful weather, is pretty darn close to paradise. From a tax standpoint, though, it ranks as something of a nightmare. And state legislators are looking to make the nightmare even worse.

The recently released SBE Council “Business Tax Index 2009” ranks the 50 states and District of Columbia from best to worst in terms of their tax systems for entrepreneurship and small business.

Hawaii ranked a poor 37th – or 15th worst.

But now, as reported by the Honolulu Advertiser, state legislators are looking to make Hawaii even more costly in terms of taxes. The hikes approved by the legislature include higher income, hotel room, cigarette, wholesale tobacco and property conveyance taxes. The income tax increase would push the top tax rate on individuals from 8.25% to 11% -- the highest state tax rate in the land.

This is a surefire way to hurt small businesses, consumers and the state’s economy.

Hawaii Governor Linda Lingle has pledged to veto most of these tax increases, with state legislators looking to override.

Stay tuned in terms of more news on taxing paradise.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council