One Down—44 to go

Why not briefly celebrate the upside to Hawaii's extremely modest creep up the ladder of economic freedom before rolling up our sleeves?

OK … celebration's over.

After all, we moved up only one place on the Economic Freedom of North America index, the study produced annually by the Canada-based Fraser Institute in conjunction with the Grassroot Institute of Hawaii that measures the extent to which provinces and states support “the ability of individuals to act in the economic sphere free of undue restrictions.”

The fact is that we've become too accustomed to Hawaii's disappointing finishes in these annual surveys of economic performance. And it has begun to mute the message that Hawaii residents should be receiving from these studies.

In 2017, Hawaii finished 45th out of U.S. states in terms of economic freedom.

Because of ties, there were only four states that did worse: West Virginia (47), New Mexico (47), California (49), and New York (50).

True, in 2016, we did score 46th, so we are moving in the right direction — or else other states are moving in the wrong direction more quickly.

As usual, it was taxation that dragged Hawaii down the most. We ranked 49th for our income tax rate and 50th for our “sales tax” (actually the state’s regressive general excise tax), which consistently lands the state in last place in every national survey.

Government spending also did us no favors, nor did the state's high level of union membership.

The largest positive was, significantly, the state's low property tax (12th overall). Unfortunately, property taxes appear to be the next place that state and county lawmakers plan to look for more money to fund their pet public programs. If we want to keep moving in the right direction, we can start by not meddling with the most lauded thing about our state's taxation and regulatory schemes.

But what is economic freedom? Why does it matter where Hawaii ranks?

Put simply, as government expands, opportunities to prosper contract. Where economic freedom abounds, so does social well-being. Where it has withered, people are poorer.  

In 2015, states with the highest levels of economic freedom had an average per capita income that was 7 percent above the national average, versus roughly 5 percent below the national average in the least-free states.

So we know where we stand: at 45.

And we know where we want to go: all the way to No. 1, the spot currently held by New Hampshire. If New Hampshire can do it, so can we.

Best of all, we know what we need to do: Cut taxes, reduce government spending, and broaden employment opportunities.

We have a road map to prosperity; all we need to do is get government out of the way.

E hana kakou (Let’s work together!),

Keli'i Akina, Ph.D.

President/CEO, Grassroot Institute

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PBN: Hawaii among worst states for economic freedom, study says