Many organizations rank the tax climate in the 50 states, but one of the most respected rankings is by the Tax Foundation, a nonpartisan educational organization based in Washington, D.C. Founded in 1937, its mission “is to educate taxpayers about sound tax policy and the size of the tax burden borne by Americans at all levels of government.” Here are the foundation’s latest rankings for Hawaii:
Business Tax Climate Index (South Dakota is No. 1, with the most favorable climate). The index compares five taxes that affect businesses: corporate tax, individual income tax, sales tax, unemployment insurance tax, and residential and commercial property taxes. The worst: California.
State/Local Tax Burden report (New Jersey, at No. 1, has the largest burden). “Hawaii has consistently had one of the nation’s highest tax burdens,” the group writes. It estimates Hawaii’s state/local tax burden at 10.6 percent of income, compared to the national average of 9.7 percent. Taxpayers here pay $4,920 per capita in state and local taxes, the group estimates, based on 2008 numbers.
State income tax collections per person (Connecticut is first, at $1,811 per capita). The foundation estimated Hawaii’s state income tax collections averaged $1,218 per person in 2006.
Hawaii has the highest top income tax rate in the nation, the foundation says. Hawaii’s income tax, expanded to 12 brackets by the Legislature last year over the governor’s veto, now has a top rate of 11 percent starting at an income of $200,000 for individuals, $400,000 for joint filers. Oregon was to vote Jan. 26 on a similar rate. The next highest top rates are New Jersey’s 10.75 percent and California’s 10.55 percent rate, both for individuals earning more than $1 million.