What Really Burdens Hawaii Businesses?

A recent survey of the business climate on a state-by-state basis ranked Hawaii as dead last as a place that would be desirable to do business, slipping from its rank of 49th place to 50th among the states.

The local daily newspaper’s editorial staff chalked the poor ranking up to the burden of the general excise tax, citing its broad base and its imposition on every transaction. And while the general excise tax is pervasive, rippling through all sectors of the economy, the editorial failed to point out that good tax policy prescribes that a good tax is one that has a broad base and that allows a low rate to be imposed yet produces substantial revenues.

The broad application of the tax, that is to nearly all transactions regardless of the type of business activity, insures accountability for the tax as there are more taxpayers who must pay the tax. In this case it is not only the customers, but the business on whom the tax is levied.

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