In Fiscal Year (FY) 2011, Hawaii collected $6.6 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Hawaii taxpayer can afford this level of taxation.
As shown in the charts below, Hawaii’s state and local tax burden (tax collections divided by personal income) was the twelfth highest in the nation for FY 2011 at 11.2 percent—or 7.5 percent above the national average of 10.5 percent. Hawaii’s tax burden has barely grown over time at only 4 percent to 11.2 percent in FY 2011 from 10.8 percent in FY 1959 (the first year Hawaii was a state).
Hawaii’s high tax burden is driven by a very high sales tax burden (4.3 percent, 2nd highest), and a high all other tax burden (2.5 percent, 11th highest). This is offset by a lower than average property tax burden (2.3 percent, 43rd highest), individual income tax burden (2.1 percent, 30th highest), and corporate income tax burden (0.12 percent, 43rd highest).
This tax structure is not surprising given Hawaii’s reliance on tourism as its primary economic driver. A large sales tax burden would be “exported,” or paid by, tourists. As a result, the residents of Hawaii enjoy a lower than average property tax, individual income tax, and corporate income tax. Of course, exported or not, a high overall tax burden is still bad for the economy.
J. Scott Moody has over 18 years as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.