The Spirit of Aloha Doesn't Extend to Taxes

From Grassroot Institute, August 26, 2016

Hawaii is famous around the world for being friendly, warm, and welcoming. It's paradise on Earth...except when it comes to your wallet.

The state persistently receives criticism from think tanks for its high cost of living and oppressive tax scheme. It has almost reached the point where it's more notable when we don't end up on the bottom of a nationwide ranking related to taxation or government regulation.

Now, Hawaii finds itself at the top of a list. Unfortunately, that's not a good thing. Kiplinger.com, the financial analysis site, has rated Hawaii one of the "Least Tax Friendly States in the U.S."  Unsurprisingly, our heavy excise tax and personal income tax rates received particular criticism:

"Temporary income tax rate hikes expired in 2016, lowering the top rate from 11% to 8.25%. But that top rate kicks in at just $48,000 for individual filers. Also, don't be fooled by Hawaii's 4% sales tax rate. Since it's due on virtually all transactions, the pocketbook effect is severe."

The state's gasoline tax ($0.43 per gallon), sin taxes, hotel tax, rental car tax, and wireless taxes also contributed to the poor rating. Honolulu's Rail surcharge is mentioned multiple times as the excise tax compounds with other taxes to drive prices up even further. The only bright spot?.

"Property taxes as a percentage of home value are the lowest in the U.S."

Granted, none of this is particularly new to those of us who pay those taxes. However, we must recognize the cumulative effect of living in the country's "least tax friendly state." Not only does it make everything more expensive, and not only does the regressive excise tax fall heaviest on those making the least, but it also acts as a barrier to economic growth.

If there's one thing we can learn from the annual "Rich States Poor States" report, it's that states with lower tax rates and fiscally responsible policies experience more economic growth and job creation than states with high taxes and a local government in love with red tape. 

Unfortunately, Hawaii has both the big taxes and the big government. If we want to see more investment in our state and a thriving economy, then we must do what we can to add a little more "aloha" to our tax policy.

E hana kakou (Let's work together!),

Keli'i Akina, Ph.D.

President/CEO

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The Least Tax-Friendly States in the U.S.

From Kiplinger.com, August, 2016 (excerpts)

…Updated for 2016, here is our list of the 10 least tax-friendly states in the U.S., where you’ll pay above-average taxes on income, property, gas and almost everything you buy. The same states occupy the five “top” spots on our list as they did in 2015; Minnesota is the biggest mover on the list, now the No. 6 least-friendly state for taxes, in part due to a new top tax rate on the state’s highest earners.In many cases, taxes may rise even higher in the years ahead. Our review of states’ fiscal health reveals crippling deficits and pension liabilities that could lead to future tax hikes, service cuts or both….

2. Hawaii

State income tax: 1.4% (on income of up to $2,400/individual, $4,800/joint) - 8.25% (on income of more than $48,000/individual, $96,000/joint)

Effective income tax rate: 6.5%/individual, 7.1%/joint

Average state and local sales tax: 4.35%

Gas taxes and fees: 43 cents per gallon (varies by county)

Hawaii has the highest effective income tax rate of all 50 states (only Washington, D.C., has a higher rate). A married couple with taxable income of $150,000 a year, two children, $5,000 in dividend income and mortgage interest of $10,000 would pay more than $9,300 a year in state income taxes. A single resident with $45,000 in earned income would pay more than $2,700.

Hawaii’s average combined state and local sales tax rate is 4.35%, among the lowest in the U.S. However, that’s misleading because few purchases, other than prescription drugs, are exempt from tax. Vehicles are subject to a 4% sales tax (technically an excise tax levied on businesses), even if they’re purchased on the mainland.

While property values are high, property taxes as a percentage of home value are the lowest in the U.S. The property tax on the state's median home value of $528,000 is $1,401, according to the Tax Foundation….

read … The Least Tax-Friendly States in the U.S.