Hawaii 2nd
worst in U.S. for
small biz, report says

High taxes, government
regulation and costly workers'
comp requirements are cited

---

By Jaymes Song
Associated Press

Hawaii ranks among the worst states in the nation for small business and entrepreneurship, according to a national report released yesterday.

The Small Business Survival Index 2001 report ranks Hawaii the second-worst state, just ahead of Rhode Island, with the District of Columbia at the bottom of the list.

Hawaii suffers under burdensome taxes, including personal income, capital gains, sales and health insurance, along with the highest gas tax, said the report created by the Small Business Survival Committee.

"In addition, Hawaii carries weighty workers' compensation costs, and the highest electricity costs," the report said.

Sam Slom, president of 2,500-member Small Business Hawaii, concurred with the study and said small businesses on the islands are hampered by heavy taxes, government regulation and costly requirements for employers. "It's a triple whammy," said Slom, who is also the Republican minority leader in the state Senate.

He said a recent cut in personal income tax has helped the small business climate, but the major problem is the state's 4 percent general excise tax, which Slom called "abusive."

"There's nothing like it in any other state," he said. "It's a gross income tax, not a sales tax."

He said Hawaii and Rhode Island are similar in many aspects including being heavily unionized, along with their population, size, economy and government regulations.

SBSC chief economist Raymond Keating, who authored the study, said the report offers a gauge by which to measure and compare how governments in the states treat small businesses and entrepreneurs. SBSC is a nonprofit small business-advocacy group based in Washington, D.C.

"Since small businesses serves as the backbone of the U.S. economy ... every state and local lawmaker should be concerned with the well-being of small business," Keating said.

The best state for small business is Nevada followed by South Dakota, Washington, Wyoming, Florida, Texas, New Hampshire and Alabama.