Study: Hawaii Tops Country For Highest Number of Services Taxed

News Release from State Budget Solutions

Alexandria, VA - Today, State Budget Solutions (SBS), a nonprofit organization advocating for fundamental reform of state budgets, released their study on the states that tax the highest number of services. Topping the list was Hawaii with 160 services taxed, followed by New Mexico and Washington that tied for second place with 158.

“Nearly every states taxes services, however, states like Hawaii, New Mexico and Washington take taxing to a new level,” said Bob Williams, State Budget Solutions President. “Many of these taxes stem from governments that have massive state budget deficits and need to tax their way out of the financial hole they are in.”

State Budget Solutions researchers found that only six states tax more than 100 services. Most states tax some services like telephone and water use, but Hawaii taxes barber shops and salons, dating services, interior design, pet grooming, window cleaning, gift wrapping services, laundry and dry cleaning, bowling alley and amusement park admission and tuxedo rentals.

In addition, any person in Hawaii engaging in service business, including professional services is assessed a tax equal to four percent of the gross income of the business. Professional services may include contractors, medical providers, tax preparers, dentists and hygienists, interior designers, hairstylists and/or legal services.

An economic analysis to determine whether it is profitable for Kentucky to tax professional services found that, despite the $322 million the state could generate from taxing services, the burden of the tax would “unfairly fall on those in the lower income bracket, and could also have a negative effect on small business.” It also noted that because other states do not tax professional services, the tax could drive business to another states.

“These states may make revenue from taxing a variety of services but the taxes may be detrimental to them in the long run when businesses and taxpayers chose to live and do business in another state where they won’t be subject of over taxation,” said Williams.

---30---

The State Budget Solutions Project is non-partisan, positive, pro-reform, proactive and anchored in fundamental-systemic solutions. The goal is to successfully engage political journalists/bloggers, state officials and opinion leaders in a new way of thinking about state government and budgets, fundamental reforms, transparency and accountability. Sharing studies and articles, data sets, anecdotes, and compelling narrative about what is happening in state and local budgets, The State Budget Solutions Project presents and disseminates information about every aspect of coming fiscal and economic disasters and, more importantly, highlights fundamental reforms to avoid them. Check out StateBudgetSolutions.org for more information.