Wall Street Journal editorial warns that Hawaii’s new “millionaire’s tax” will extend beyond top earners. The policy raises rates on pass‑through entities—S corporations, partnerships, LLCs—that small‑business owners operate. Those structures route tax hikes straight into owners’ pockets, tightening local cash flow while bolstering the state’s revenue stream and potentially stalling entrepreneurial expansion the islands.

A Stanford University study combed through 30 years of Census data and found that higher individual income tax rates trigger job losses, business relocations, and closures among pass‑through firms. Those ripple effects hit workers, families, and local economies, turning tax policy into a hidden cost for communities that rely on small‑business vitality in Hawaii today.

These findings suggest that Hawaii’s tax shift will strain the very entrepreneurs the state seeks to attract. As owners shoulder higher burdens, they may cut hiring, delay expansion, or relocate. The resulting shrinkage in local employment and innovation could erode the tourism and tech sectors that underpin the islands’ economic resilience and long‑term growth for Hawaii.

Ultimately, the tax’s design risks disincentivizing the very growth the legislature aims to fund. If small‑business owners retreat or scale back, Hawaii could lose the entrepreneurial talent that fuels its tourism boom and burgeoning tech scene, leaving the state with higher taxes but thinner economic output and sustained prosperity for residents worldwide in the future.