The Washington D.C.-based Tax Foundation ranked Hawaii in the bottom third of states in terms of the tax burden faced by businesses.

The nonpartisan think tank ranked Hawaii 35th out of 50 states in the 2012 State Business Tax Climate Index, unchanged from 2011. A rank of 1 is considered most favorable to business while 50 is least favorable.

The report analyzed 118 variables in five major areas of taxation. Hawaii’s scores in each of five categories varied widely, with the state earning a fourth-place ranking for its corporate tax structure and a 41st-place finish for its individual tax burden. Hawaii ranked 15th for its property tax and 30th for unemployment insurance tax.

"While taxes are a fact of life, not all tax systems are created equal," the report’s authors wrote. "The evidence shows that states with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth."

Hawaii ranked poorly in the individual tax category in part because of its top marginal tax rate of 11 percent, which was tied with Oregon as the nation’s highest, according to the report. Hawaii’s top bracket applies to taxable income over $200,000 while in Oregon the threshold is $250,000. Other states with such tax rates include California, 10.3 percent; New York, 8.97 percent; and New Jersey, 8.97 percent. Pennsylvania had the lowest top rate at 3.07 percent.

Hawaii also was marked off for not indexing its tax brackets for inflation. As a result, Hawaii taxpayers can be pushed into a higher tax bracket based on inflation rather than an actual increase in income, according to the report.

In addition, the Tax Foundation was critical of Hawaii’s general excise tax because it is charged on intermediary transactions, such as those between wholesaler and retailer.

Such pyramiding is undesirable because it causes "economic distortion," according to the report. Hawaii, New Mexico, Washington and South Dakota all employ some sort of pyramiding in their excise tax regime, the report said.