By now Hawaii residents have grown used to hearing that their state is a tough place to do business, but sinking to the very bottom of the list — any list — still stings.
It’s easy to make too much of a report such as the one issued by CNBC, the TV network that annually ranks the business climate in states. It’s not entirely clear from the "America’s Top States for Business 2013" report what changed in Hawaii to drop it down the final rung on the ladder from No. 49 to the No. 50 spot.
There are persistent problems that arise for those doing business in Hawaii — stemming from tax policy, a heavy and inefficient regulatory process, unionization and other factors — that can be rooted out after only long effort, if ever.
But in the short term, there has been some decent work going on here to improve things, at least in targeted areas.
Topping the list of pro-business bills signed into law was the HI Growth Initiative, which over the course of the legislative session was properly scaled back to fit budget realities, providing $6 million for entrepreneurial companies capable of generating new high-paying jobs. It got bipartisan support. GOP state Rep. Gene Ward cited the need for Hawaii to address its "dearth of entrepreneurs," backing House Bill 858 because it helps those "who put together the resources to make economic development happen."
The film industry got another boost with an increase in tax credits, and the tax credit for research activities that produce desirable technical jobs was also reenacted.
And if the physician’s "do no harm" directive can apply to lawmakers, the Legislature also snuffed out one of its most plainly anti-business bills. House Bill 634 would have compelled buyers of businesses to retain all their employees, another ding on Hawaii’s image as a hostile business climate.
Bad ratings on that climate are issued regularly, and that’s an indicator of some deep problems the state is at pains to correct. One such long-term funding commitment — updating Hawaii’s woefully inadequate information technology system — moved ahead this year. That ought to help improve government services that, more broadly, can interfere with business.
It’s sure to be a long time before many such improvements will be felt, however, and Hawaii businesses still have to contend with the general excise tax burden. Supporters of this tax point to its breadth as an asset in generating revenue from across the economy and in its overall fairness.
However that’s also its chief problem. The tax compounds at every transaction level, increasing the base and then applying the rate to the larger amount. It’s one of the elements that drive up the cost of doing business and living in the islands.
So although incremental steps taken to combat Hawaii’s bad-business image should be noted, they don’t erase the abiding need for tax reform or streamlining its regulatory systems. That would reduce the drag on private and public projects.
And while all that work is underway, Hawaii residents can at least take heart that not all the news from rating reports is bad. That same CNBC report put the state No. 1 for quality of life. In the end, we want some regulation to protect Hawaii’s resources and way of life, but it doesn’t need to burden business as much as it has.