Or look at the cost of doing business. Again, Hawaii comes in at a disadvantage because of its location, which helps explain why utility bills and office rent are the highest in the nation—the average electric bill in Hawaii is four times the rate in Arkansas, and office rent is twice as high.
Location also helps explain why taxes are on the high side. But it doesn't explain the complexity of Hawaii's tax code, with at least a dozen different personal income tax rates, according to the state revenue department's website. The Tax Foundation's annual ranking of state business tax climates puts Hawaii's at No. 30, dinging the state for its multiple tax brackets, its 11 percent top marginal income tax rate and its failure to index corporate taxes for inflation.
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And when it comes to incentives to help companies reduce their cost of doing business, such as tax breaks and outright state aid, Hawaii is among the stingiest.
Of course, the state does have some built-in incentives beyond its quality of life—incentives that make Hawaii a unique place in which to do business. Here is one where location works to Hawaii's advantage: Its time zone is roughly midway between the Pacific Rim and the East Coast, making it much easier to be in two places at once.
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The state prides itself on being a hub of innovation, ranking 12th in the nation for start-ups this year, according to the Kaufmann Foundation. The report estimates that for every 100,000 adults, 350 become entrepreneurs every month. And it's not out of desperation. Nearly 89 percent of new-business owners last year were employed and left an existing job to strike out on their own, one of the highest rates in the nation. It helps that Hawaii residents seem inherently happy, healthy and motivated. Probably has something to do with that great quality of life.
But will Hawaii ever parlay those advantages into a Top State ranking? Realistically, probably not. There is just too much working against the state. Still, that doesn't mean it can't unleash a little more of its legendary hospitality on business.