The Tax Foundation, the nonprofit group best known for inventing Tax Freedom Day, ranks Hawai‘i as having the least hospitable business tax climate of the 50 states. The study, “State Business Tax Climate Index,” ranks South Dakota as having the
The Tax Foundation, the nonprofit group best known for inventing Tax Freedom Day, ranks Hawai‘i as having the least hospitable business tax climate of the 50 states. The study, “State Business Tax Climate Index,” ranks South Dakota as having the most business- friendly tax state code in the country.
The index measures five things: Individual income tax, corporate income tax, sales tax, unemployment insurance tax, state fiscal balance.
The study was sparked by the finding that 99 percent of relocated jobs move to other states, and not overseas.
“States do not enact tax changes in a vacuum,” said Scott Hodge, president of the Tax Foundation.”Every tax change will affect a state’s competitive position.”
The goal of the study is to focus state lawmakers on good tax fundamentals in their states as opposed to short-term tax abatements and exemptions designed to temporarily lure high profile companies, baseball teams, and auto plants from other states, said the Tax Foundation, a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
The index generally rewards tax codes that are neutral, have low and flat rates, are simple and transparent, avoid double taxation, and have statutory or constitutional restraints that keep tax burdens low over time, the group said.
“Nearly all of the best states raise sufficient revenue without imposing at least one of the three major state taxes — sales taxes, personal income taxes and corporate income taxes,” said Scott Hodge, president of the Tax Foundation and co-author of the study. Following South Dakota to round out the top 10 states in the most-friendly category were Florida, Alaska, Texas, New Hampshire, Nevada, Wyoming, Colorado, Washington and Oregon.
Joining Hawaii in the leastfriendly rankings were New York, Minnesota, West Virginia, Rhode Island, Vermont, Kentucky, Arkansas, Maine and Wisconsin.
The study said the worst state tax codes tend to have complex, multi-rate corporate and individual income taxes with above-average tax rates; above-average sales tax rates that don’t exempt business-to-business purchases; complex, high-rate unemployment tax systems; and high overall state tax collections with few tax or expenditure controls. Hawaii Republicans, including Gov. Linda Lingle, have been frequent critics of the state’s tax structure that they say is antibusiness and reduces competition in the islands.
