State Facts
Analysis
Hawaii has much room to improve. It scores poorly on all three dimensions of freedom.
On the spending side, the state is highly fiscally centralized due to its unique statewide school system. The tax burden is one of the highest in the country, at 11.3 percent of income. Sales, utilities, individual income, and motor vehicle license taxes are especially high.
In the regulatory policy dimension, the state government is interventionist, with strict workers’ compensation requirements, mandatory short-term disability insurance, and no right-to-work law. Land use is a politicized issue in Hawaii, and the state has the strictest zoning regulations in the country, while eminent domain abuse remains totally unchecked. The state is surprisingly laissez-faire about health insurance, with no community rating, even in small group markets; limited use of “prior approval” for premiums; and fewer mandates than average. Property/casualty insurance markets, on the other hand, are tightly regulated. Occupational freedom is restricted, with abnormally onerous education/experience, examination, and fees requirements. The court system is somewhat worse than average.
Gun control laws are among the most restrictive in the country—carrying a handgun is banned for everyone but police and security guards, and purchasing either a long gun or a handgun requires a permit and 14-day waiting period—but marijuana laws are relatively liberal. Hawaii has the ninth strictest gambling laws in the country: the only type of gaming permitted is social. Smoking bans apply to restaurants, bars, and workplaces without any exceptions. The cigarette tax, at $3.20 per pack, is one of the highest in the nation after being raised $1.20 in 2009—10. On the other side of the ledger, limited same-sex domestic partnerships are recognized (they have been upgraded to civil unions after the closing date for this study), and the crime-adjusted incarceration rate and drug arrest rate are much lower than average.
Policy Recommendations
- Cut the taxes mentioned in the fiscal policy paragraph above, offsetting the change by reducing spending, particularly on personnel, in areas that are abnormally high, such as airports, public buildings, hospitals, sanitation and sewerage, and miscellaneous commercial activities.
- Reform the tort system to discourage frivolous lawsuits and decrease the cost of the process. Even an average court system would have raised Hawaii five places on regulatory policy.
- Legalize some form of gambling. Hawaii’s political culture seems to be opposed to large-scale, casino-style gaming, but there are alternative models that promote smaller-scale, competitive markets. One example is excluding games with an element of skill, such as poker and blackjack, from the gambling statute.
