Report: Hawaii has one of lowest sales tax rates in U.S.
Fri, Feb 10, 2023 1:00 PM
By Merrilee Gasser, The Center Square
Hawaii has one of the lowest combined state and local tax rates in the nation, according to a report from the Tax Foundation.
The state is among the five with the lowest combined state and local tax rates, according to a report by the Tax Foundation, an independent tax policy nonprofit.
Hawaii has a state tax rate of 4% and an average local tax rate of 0.44% for a combined rate of 4.44%, according to the independent tax policy nonprofit.
The state with the highest combined tax rate is Louisiana, where the tax rate is 4.45%, and the average local tax rate is 5.10%. Louisiana residents face a total combined tax rate of 9.55%. The highest local tax rate allowed in Louisiana is 7%, according to the report.
Colorado has a 2.9% state-level sales tax rate. Alabama, Georgia, New York, and Wyoming are below 4%.
A state’s combined tax rate can impact where consumers choose to make purchases or where businesses decide where to local themselves, according to the Tax Foundation. People can avoid high taxes by shopping online. Companies will sometimes decide to set up shop right outside high sales-tax areas to avoid the higher tax rates, according to the report.
“State and local governments should be cautious about raising rates too high relative to their neighbors because doing so will yield less revenue than expected or, in extreme cases, revenue losses despite the higher tax rate,” the report said.
Hawaii’s sales tax is the broadest in the U.S., according to the report. Taxes many products multiple times is taking a bite of our personal income, according to the Tax Foundation. About 119% of personal income is taxed in Hawaii. The national average is 36%.
“While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts,” the report said.
The General Excise Tax in Hawaii also applies to medical services. A bill that would remove the medical services excise tax is currently moving through the Legislature. Gov. Josh Green said in his State of the State address he wants to lower taxes on food and medicine, too.