HONOLULU—Hawaii ranks worst in three major categories in the seventh annual “Rich States, Poor States” report, which tracks states’ economic policies based on 15 policy areas.
Hawaii has no sales tax; residents pay a general excise tax for goods and services, including food, medical services and medical prescriptions.
The state has the highest “sales” tax in the nation—about $42.62 per $1,000 of personal income is taken by the state—and, when the excise tax is equated to sales tax, Hawaii has the single most burdensome tax on goods.
Tom Yamachika, president of the Tax Foundation of Hawaii, says Hawaii’s general excise tax is “sneakier” than a retail sales tax.
“You see a sales tax once on your retail invoices, while our [general excise tax] can be imposed many times during the economic chain of events that ends with a retail sale. In that respect, there are winners and losers, as the tax favors the big business that handles more links in the supply chain itself instead of relying on others who then get taxed,” Yamachika said.
Economist Arthur Laffer, Heritage Foundation chief economist Stephen Moore, and Jonathan Williams, director of the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council, wrote “Rich States, Poor States.”
Hawaii received other notable mentions.
The state is ranked 48th with a marginal personal income tax rate of 11 percent. Just two other states have higher income taxes. New York, at 12.7 percent, is 49th, and California, 5oth, comes in at 13.3 percent.
For combined federal corporate tax and state corporate tax rates, Hawaii is listed at 39.2 percent or 2.4 percent below the worst state—Iowa at 41.6 percent.
In overall economic outlook, Hawaii was 40th.
Senate Minority Leader Sam Slom, a Republican, said he has serious concerns about Hawaii’s economic outlook.
“Why then, does our Legislature continue to have the highest sales tax burden and some of the highest personal income tax rates in the nation. When is our government going to get it?” Slom asked. “You can’t overtax the people to support bad spending habits, and then expect people to stay and invest in our state.”
Slom, the only Republican in the 25-member Senate, said he consistently introduces bills to alleviate these burdens, but the majority has blocked his efforts.