And the Lowsman Trophy Goes To…Hawaii!

By Tom Yamachika, President, Tax Foundation Hawaii

You may have heard about Marcus Mariota, the “favorite son” from Hawaii who went on to win the Heisman Trophy and was then picked in the first round of the NFL draft. What you might not know is that there’s also a Lowsman Trophy, for the pro football player who is picked dead last in the draft. The player winning that trophy also gets the coveted title of “Mr. Irrelevant.”

CNBC, the business news network, recently published its rankings of “America’s Top States for Business.” They score the 50 states on more than 60 measures of competitiveness, separated into 10 broad categories and then weighted based on how frequently each is used as a selling point when the states market themselves. This year the categories were workforce, cost of doing business, infrastructure, economy, quality of life, technology and innovation, education, business friendliness, cost of living, and access to capital. Hawaii was ranked #1 in quality of life. However, its scores in the nine other categories were either miserable or abominable, leading to an overall finish at #50, dropping one place from last year.

We were ranked #50 in cost of living and cost of doing business, and #49 in infrastructure (just behind Rhode Island, last year’s Lowsman winner). Our highest rank in categories other than the one we aced was #36, for technology and innovation.

One of the report’s authors observed that part of the problem is unavoidable. We are in the middle of the ocean, more than 2,000 miles away from the mainland and the bulk of U.S. resources. The same factors that make us an expensive place to live also make us an expensive state to govern and to do business.

The author, however, also points out that there are some factors we can control where we have failed horribly. Roughly 40% of our bridges are rated structurally deficient or functionally obsolete by the U.S. Department of Transportation. The nonprofit Reason Foundation ranked the overall highway performance of state highway systems in 2012 and gave Hawaii a #50 overall rank, powered by #50 finishes in the amount of funding spent for administration and for urban interstate pavement condition, and #49 performance in rural interstate pavement condition, rural arterial pavement condition, and urban freeway congestion. To give an example, Kentucky spent about $900 in administrative costs per state-controlled highway mile, and we spent $90,000. Part of that extra money might be justifiable, but it will probably be very hard to come up with a satisfactory explanation of both extra zeroes.

Hawaii was also hammered for our regulatory climate, which has been described by our own Hawaii Business magazine as “onerous,” and for our tax system. The Mercatus Center at George Mason University’s an annual report entitled “Freedom in the 50 States” ranked Hawaii #47 and described our regulatory climate as “interventionist.” We can do something about that.

We also got dinged for our 11% top tax rate, and for the complexity of our tax code with more than a dozen different personal income tax rates. Fortunately, our lawmakers are allowing the three top rates to die a natural death at the end of this year with our highest marginal rate a more modest 8.25%.

CNBC’s author concludes by observing that there’s too much working against us to be able to get a top ranking in the study, but we should perhaps unleash a little more of our legendary hospitality on business. So our challenge to government administrators and lawmakers is to see if some of these issues can be addressed. Maybe we can work on them enough so that we don’t again take home the Lowsman Trophy in America’s Top States for Business.

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Background: CNBC: Hawaii Worst State for Business