Tax season just ended. You wrote the check. And somewhere between signing the return and closing the envelope, you probably asked yourself a question that nobody around you had a clean answer to: is the state I am building my life in actually working for me?
That question is what this series is about.
Five articles. My honest take, built from real client experience, on the states that cost business owners the most and why. Not a scientific study. A practitioner’s view from someone who has watched real money leave real accounts for years. I will tell you upfront that this ranking is mine, shaped by what I have personally seen cost people the most in dollars, in complexity, and in the kind of compliance headaches that make otherwise rational people consider moving to a state with a lower ambition for their wallet.
Your experience might order this list differently. That is fair. What I can promise is that every state in this series earned its spot through a combination of total tax burden and how hard the state makes it to actually comply. Because the rate is only half the story. The other half is what it costs you just to navigate the system.
We are starting with numbers five and four. Hawaii and Connecticut. Two states that rarely get top billing in these conversations. That is exactly why they are going first.
Why Looking at the Rate Alone Will Cost You
Most people shopping states for tax purposes do the same thing. They find the income tax rate, look at the number, feel relieved (or horrified), and move on.
That approach misses at least half of what it actually costs to live and do business in a given state. A state can carry a modest income tax rate and still drain you through property taxes, gross receipts taxes, estate taxes, local surtaxes, and compliance costs that never show up in that first search. I have seen clients relocate to a so-called low-tax state and end up paying more than they did before because nobody walked them through the full picture before they signed the paperwork.
That is what this series is about. Not just the number at the top of the bracket. The full picture. And if you want to understand the philosophy behind why I approach tax planning this way, the piece I wrote on why smart business owners treat taxes as a strategy and not a bill is a good place to start. Everything in this series flows from that same idea.
Hawaii: Yes, It Is Beautiful. No, That Does Not Make It Free.
Hawaii is one of the most stunning places on earth. I am not going to pretend otherwise. But stunning and expensive tend to travel together, and in Hawaii the tax system is designed in a way that catches most people completely off guard.
The total state tax burden in Hawaii sits at 13.3% of personal income as of 2026. That is the highest of any state in the country. But the number that really deserves your attention is 7.5%. That is the share of income Hawaii residents pay specifically in sales and excise taxes every year. Also the highest in the nation. And by a margin that is not even close.
Here is why that number matters more than it might seem at first glance.
Hawaii does not have a traditional sales tax. What it has is something called the General Excise Tax, or the GET. And the GET is a fundamentally different animal. It is a gross receipts tax, which means it applies to the total revenue a business generates before any expenses come off the top. A traditional sales tax is collected at the point of sale from the consumer. The GET is applied to every dollar flowing into the business, whether the business is profitable or not. Bad quarter? Losing money on a project? The state still wants its share of the gross.
That alone would be notable. But the GET does something else that most people do not realize until they are already inside the system. It cascades. When a wholesaler sells to a retailer, the GET applies. When that retailer sells to the end customer, the GET applies again. The tax embeds itself at every layer of the supply chain, compounding quietly as it goes. What the customer ultimately pays reflects multiple rounds of this tax built invisibly into the price. It is not labeled anywhere. It is just there, baked in.
For a business owner trying to plan around this, the practical consequence is real. You cannot look at your own GET exposure in isolation. You need to understand how the tax interacts with every transaction in your supply chain, how it stacks, and how it affects your pricing against competitors operating in states without this kind of structure. Layer on top of that Hawaii’s individual income tax rate of 11% at the top bracket, second highest in the nation, and you have a state that charges aggressively on both the personal and the business side at the same time.
I genuinely like Hawaii. I have clients who chose to build their lives there and would not trade it for anything in the world. But not one of them would tell you the tax structure was the selling point. It was the sunsets. The taxes were the surprise that arrived later. And in Hawaii, surprises tend to be expensive.
Connecticut: The Most Underrated High-Tax State in America
When people list the worst states for taxes, they usually land on California, New York, and New Jersey. Connecticut gets mentioned less. I think that is a mistake that costs people real money.
Connecticut’s total tax burden comes in at 13.37% of personal income. That puts it ahead of California in the overall burden ranking and firmly in the top five worst states in the country. The state’s individual income tax rate tops out at 6.99%, which is not the highest anywhere but layers on top of a property tax structure that is among the most punishing you will find.
Effective property tax rates in Connecticut average around 2.14% of home value annually. On a $500,000 home, that is roughly $10,700 per year in property taxes alone. On a $1 million property, you are looking at over $21,000 every single year, regardless of what the market is doing or what your business earned. Connecticut is one of only four states in the country where property taxes consistently exceed 2% of home value. That distinction deserves far more attention than it gets.
But the part I think is most underappreciated about Connecticut, and the part that hits my clients hardest, is the estate tax.
Connecticut imposes its own estate tax with an exemption threshold that sits meaningfully below the federal level. For business owners who have spent years building value in their company, their real estate holdings, and their investment accounts, this gap between the state and federal exemption is not a theoretical problem. It is a real cost that directly affects how wealth moves to the next generation. Estates that would transfer completely free of tax at the federal level can still trigger a significant Connecticut state liability, and that requires planning that many people never get around to doing until the window for doing it well has already closed.
If you have been following the series I put together on whether you can actually afford to retire at 65, you already know that the tax decisions made during the accumulation years echo loudly into retirement and estate planning. Connecticut makes those echoes considerably louder.
There is also the pass-through entity tax, or PTET, which Connecticut adopted as a workaround for the federal SALT deduction cap. The concept is sound. The entity pays state income tax at the entity level, receives the full federal deduction, and the owner gets a corresponding credit on the personal return. Clean in theory. In practice, the credit mechanics in Connecticut are genuinely unforgiving. If the timing or the calculation drifts even slightly, you end up with a credit that does not fully offset the personal tax liability. You paid more than you needed to, and often you do not find out until the return is already filed and the money is already gone.
One more thing worth knowing about Connecticut that almost never comes up in these conversations. Property taxes are assessed using mill rates that vary not just county to county but town to town. Two properties of identical value sitting ten miles apart can carry meaningfully different annual tax bills simply based on the municipality they happen to sit in. That makes real estate tax planning in Connecticut highly location-specific in a way that adds friction at every level and requires guidance that goes well beyond a general understanding of the state’s tax code.
In Connecticut, the complexity does not announce itself. It just shows up in the math.
What These Two States Actually Have in Common
On the surface, Hawaii and Connecticut could not look more different from each other. One is a tropical island chain in the middle of the Pacific. The other is a small, dense state sitting between New York and Rhode Island. From a tax standpoint, though, they share more than you might expect.
Both states cost more than people anticipate before they arrive. The rate sheet does not tell the full story in either case. The structure of the taxes, how they interact, how they compound, and how they create compliance obligations that go well beyond a simple return and a check, that is where the real cost lives in both states.
Both states create meaningful complexity specifically for business owners. Hawaii’s GET cascades through your supply chain in ways most business owners never see coming. Connecticut’s PTET mechanics require precise execution to actually deliver the savings they are supposed to provide. Neither of these is an environment where a general understanding of tax law is enough. You need someone who knows the specific rules, and even then you need to stay current because both states update their approaches regularly.
And both states have a gap between what people expect going in and what the experience actually costs them. That gap is where I spend a significant part of my professional life. Helping people understand what they are actually dealing with before the numbers land in a way that is hard to absorb is, in a lot of ways, what my purpose (and business) has always been about.
The cost of tax compliance is real and it is often invisible until someone adds it up properly. In Hawaii and Connecticut, that invisible cost runs higher than most people ever budget for.
If any of this is making you think about your own state exposure in a new way, that is worth paying attention to. The business owners who end up in the best position are almost always the ones who asked the question before they had to.
How This Series Works
This is article one of five. The series is built like a countdown, and that is intentional. Hawaii and Connecticut are expensive and complex in ways that deserve more attention than they typically get.
But they are not the worst offenders in this ranking. Not by a long shot.
I built this series from my perspective as someone who has worked with clients navigating these systems for years. I am based in Florida, and I work every day with people who made a deliberate choice to structure their business life somewhere that does not treat tax planning as a contact sport. That context shapes how I see all of this, and I think you deserve to know it going in.
Geography is part of your tax strategy. Most people just forget to plan for it until the bill arrives to remind them.
The countdown continues next week. You will want to read about the two heavyweights that have earned their reputations, and then some.
Welcome to the New Age of Accounting. Let’s begin.
P.S. If you found this article helpful, you’ll love my new book S-Corp Mastery: How Smart Business Owners Maximize Tax Savings & Build a Lasting Legacy. It’s now live and available in a sleek, easy-to-read PDF version. Grab your copy here
Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
