Worst state for business: America's paradise lost

by Scott Cohn, CNBC, June 24, 2015 (excerpts)

...by the numbers on just about everything else, Hawaii doesn't measure up, and not only for reasons beyond its control.

CHART: America's Top States for Business 2015 

Take Hawaii's infrastructure—the second worst in the nation behind Rhode Island's, according to our study....

Roughly 40 percent of the state's bridges are rated deficient or worse by the U.S. Department of Transportation. .... The nonprofit, nonpartisan Reason Foundation rated Hawaii's urban interstate highways the worst maintained in the nation, with congestion second only to Florida.

As for the regulatory climate, which even the Hawaii Business Journal conceded is "onerous," the Mercatus Center at George Mason University, in its annual report "Freedom in the 50 States" goes even further, calling Hawaii "interventionist, with strict workers' compensation requirements, mandatory short-term disability insurance, and no right-to-work law."

Hawaii's unemployment rate is below the national average, coming in at 4.1 percent in May. But in our all-important Workforce category, where Hawaii comes in 46th, the state not only loses points for its heavy union presence—nearly 23 percent of workers are represented, according to the Bureau of Labor Statistics—but also because state worker training programs are showing only modest success putting people to work....

...the average electric bill in Hawaii is four times the rate in Arkansas, and office rent is twice as high.

Location ... doesn't explain the complexity of Hawaii's tax code, with at least a dozen different personal income tax rates, according to the state revenue department's website. The Tax Foundation's annual ranking of state business tax climates puts Hawaii's at No. 30, dinging the state for its multiple tax brackets, its 11 percent top marginal income tax rate and its failure to index corporate taxes for inflation....

And when it comes to incentives to help companies reduce their cost of doing business, such as tax breaks and outright state aid, Hawaii is among the stingiest....

The state prides itself on being a hub of innovation, ranking 12th in the nation for start-ups this year, according to the Kaufmann Foundation. The report estimates that for every 100,000 adults, 350 become entrepreneurs every month. And it's not out of desperation. Nearly 89 percent of new-business owners last year were employed and left an existing job to strike out on their own, one of the highest rates in the nation. It helps that Hawaii residents seem inherently happy, healthy and motivated. Probably has something to do with that great quality of life.

But will Hawaii ever parlay those advantages into a Top State ranking? Realistically, probably not. There is just too much working against the state. Still, that doesn't mean it can't unleash a little more of its legendary hospitality on business....

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