1. T HE 2014 S TATE B USINESS T AX C LIMATE I NDEX Presented by the Tax Foundation of Hawaii

4. Individual Income Tax: #35 Top rate (11%) is second only to CA ( 13.3%) Worst with largest number of brackets (13) ◦ Includes “temporary” 9%, 10%, 11% brackets expiring 2015? We have: ◦ Conformity to the Internal Revenue Code ◦ No Alternative Minimum Tax ◦ No Marriage Penalty ◦ Recognition of LLC and S Corp statuses following Federal

5. Sales Tax: #16 We tax many business inputs, but at least we have a lower “wholesale rate” Relatively low rate (4%) ◦ Four states have no sales tax, CO rate is 2.9%, 7 states at 4% ◦ Some states allow local option sales taxes exceeding state rate We have high product-specific excise taxes ◦ Tobacco tax, $3.20/pack (4 th highest) ◦ Beer tax per gallon, $0.93 (4 th highest)

6. Corporate Income Tax: #4 NV, SD, WY are tied for #1 (they have no corporate income tax) We have: ◦ A relatively low top rate (6.4%) ◦ Only a few brackets ◦ Not indexed for inflation (but none of the states index) ◦ Conformity to the Internal Revenue Code ◦ No Alternative Minimum Tax

7. Property Tax: #12 Real property is taxed at a relatively low rate (+) We don’t have personal property or capital stock taxes (+) We have asset transfer taxes including conveyance tax and estate tax (-)

8. Unemployment Tax: #38 Massive taxable wage base ($39,000) (2 nd highest after WA) ◦ Study looks for a wage base similar to FUTA ($7,000) Added benefits/surtaxes (Employment & Training surcharge) Maximum and minimum rates also considered – we were in the second highest rate schedule (“Schedule G”) in 2013 Dropped 8 spots from 2012 ◦ Tied for worst with NJ ◦ Expecting modest gain next year because 2014 put us back into Schedule E