Survey finds Hawaii last
in being business-friendly

Cayetano discounts the ranking by
the Small Business Survival Committee

Best and worst

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By Bruce Dunford
Associated Press

Hawaii is ranked dead last among the 50 states when it comes to being friendly to small businesses, primarily because of the costs imposed by government, a Washington-based advocacy group reported yesterday.

Gov. Ben Cayetano, however, said Hawaii residents through their political leaders have decided over the years to pay more to have more government services than found in most other states.

"This organization, as I understand it, is very, very conservative. They see unionism, for example, as a negative for business," he said. "If you go to some of these right-to-work states, that's a point of view that we have not accepted here in Hawaii."

The Small Business Survival Committee determined the rankings by considering 20 government-imposed or government-related costs that affect small businesses, primarily taxes.

South Dakota was the top state and Hawaii last, although the District of Columbia was listed 51st in the group's "Small Business Survival Index 2002."

"So, what's new?" quipped Lowell Kalapa, president of the business-supported Tax Foundation of Hawaii. "Being in small business is Hawaii is not easy."

Last year, Hawaii ranked as the second-worst state, just ahead of Rhode Island and with the District of Columbia at the bottom.

"Hawaii benefits from imposing no added death taxes. However, Hawaii ranks poorly in terms of personal income taxes, capital gains tax, sales, gross receipts and excise taxes, unemployment taxes, electricity costs, workers' compensation costs and the crime rate," the group said in a news release.

Hawaii has the second highest sales (excise) tax at 5.88 percent, third highest unemployment tax at 5.16 percent, seventh highest top personal income tax rate at 8.25 percent, the 10th highest capital gains tax at 7.25 percent, 30th highest corporate income tax at 6.4 percent, but sixth lowest property taxes at 1.87 percent, according to this year's survey.

Other factors for the overall ranking included health care and electricity costs, workers compensation costs, crime rate, the right-to-work status, size of the state and local work force per capita, gasoline taxes, minimum wage and Internet access tax.

"Since small business is the true driving force behind economic growth, every state and local lawmaker should be concerned with the well-being of small business," said economist Raymond J. Keating, who wrote the study.

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Biz assessment Rankings by the Washington, D.C.-based Small Business Survival Committee: 1. South Dakota 2. Nevada 3. Wyoming 4. Texas 5. Florida 46. California 47. New Mexico 48. Minnesota 49. Maine 50. Hawaii 51. District of Columbia