New Sales Tax Study Highlights the Problem in Hawaii's GET

News Release from Grassroot Institute

HONOLULU, Hawaii -- September 3, 2013 -- A new study from the Tax Foundation examining state and local sales taxes nationwide highlights an underlying problem with Hawaii's sales tax.

On paper it may appear Hawaii has a "low sales tax," but that is not the case.

The Tax Foundation study states that, "Experts generally agree that Hawaii has the broadest sales tax in the United States, taxing many products multiple times and, by one estimate, ultimately taxing 99.21 percent of the state's personal income."  The Study points out, "This base is far wider than the national median, where the sales tax base applies to 34.46 percent of personal income."

The report ranks Hawaii among states with the lowest overall non-zero sales tax rates at 4.35%,  but the "4%" of that figure, representing the state's unique General Excise Tax, is actually responsible for what, in practice, is the highest sales tax burden in the nation.

Grassroot Institute believes Hawaii's unique and high GET tax hurts  middle class and low-income consumers the most.

According to Keli'i Akina, Ph.D., president of Grassroot Institute of Hawaii, "Hawaii's General Excise Tax may fill the state's coffers, but at a terrible cost to Hawaii's businesses and economy.  Those at the lower-income levels of society, including the disadvantaged and much of the middle class, are hit the hardest by Hawaii's G.E. Tax because they pay a disproportionately high percentage of their income for almost everything they buy."

That reality is echoed in the American Legislative Exchange Council's fifty state economic index, Rich States, Poor States, which shows that Hawaii's sales tax burden per citizen is one of the highest at $42.40 per $1000 of personal income.

Akina continues, "At a time when the State should be taking steps to boost the overall economy and provide incentives for business to expand here, our G.E. Tax structure discourages entrepreneurship and penalizes both businesses and consumers.  Hawaii's leaders must reform our state's damaging General Excise Tax, thereby encouraging economic growth and making living in Hawaii more affordable for all of our citizens."

The Tax Foundation and Grassroot Institute of Hawaii are both affiliated with the State Policy Network's coalition of free-market think tanks. The full Tax Foundation report can be found at: http://taxfoundation.org/article/state-and-local-sales-tax-rates-midyear-2013.

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Related: Hawaii GE Tax "Broadest in the US"