A ‘Millionaire’s Tax’ Is a Tax on Main Street

Wealth taxes like Hawaii’s disproportionately fall on small-business owners

Letter to The WSJ. 

"Your editorial “The Tax Collector’s Paradise” (May 28) is right to warn that Hawaii’s new “millionaire’s tax” won’t stop with high-income earners. In reality, higher income tax rates often disproportionately fall on small-business owners whose companies are organized as S corporations, partnerships, LLCs and other pass-through entities.

The consequences extend beyond individual taxpayers. A Stanford University study examining 30 years of Census Bureau data found that increases in individual income tax rates led to job losses, business relocations and even business closures among pass-through firms. Those are real-world costs borne by workers, families and local communities.

Small-business owners feel these pressures firsthand—and the data confirms that. A 2024 survey from the Job Creators Network Foundation found that more than one in four have considered relocating to a state with lower taxes and less regulatory burdens. Meanwhile, Federal Reserve research has found that tax increases make it more difficult for small businesses operating on tight margins to cover expenses, including payroll.

When lawmakers raise income taxes, they aren’t simply taxing income. They are changing incentives for entrepreneurs, investors and employers. Hawaii’s leaders may discover that the people who create jobs and grow businesses have more options than some politicians assume.

Policy matters, and Americans will continue to vote with their feet.

Taylor Gage

Citizens for Free Enterprise"