A nationwide tax group has taken Hawai'i to task for raising taxes and noted it's installing a "millionaires' tax" that could result in a new brain drain from the state.

An article posted on the Tax Foundation's Web site said Hawai'i is leap-frogging seven other states to move into the No. 1 spot for income tax rates (11 percent for individuals making more than $200,000 and couples making more than $400,000).

Moreover, the recent legislative moves mean the state will have more tax brackets — a dozen — than any other state and the second-highest cigarette tax.

The Washington, D.C., group that advocates for what it deems is sound tax policy was generally critical of Hawai'i lawmakers for enacting tax increases that go into effect July 1. Legislators voted to increase taxes on the wealthy, hotel rooms, high-priced home sales and tobacco products as they wrangled over a troublesome budget shortfall and a constitutional obligation to balance the budget.

Gov. Linda Lingle, a Republican, vetoed most of the tax increases, but the majority Democratic Legislature overrode her vetoes. Legislators said they faced the tough choice of severe budget cuts or tax increases.

But the Tax Foundation said the lawmakers' decisions weren't great ones. It said Hawai'i is joining four other states adopting a so-called millionaires' tax that imposes a top rate near or above 10 percent on high-income earners.

The Tax Foundation, in the article written by tax counsel Joseph Henchman and analyst Mark Robyn, said such policies might sound good during tight fiscal times but may have a corrosive effect in that highly mobile entrepreneurs are sensitive to income tax rates.

"Yes, such taxes will generally raise revenue in the short term without a sudden exodus of wealthy people fleeing to the state next door, especially in Hawai'i," the article says.

"But over the medium term, the taxes will negatively impact location decisions. People expanding old businesses or creating new ones will incorporate the higher cost of doing business into their decision-making and steer clear of the state."

Later it adds, "Hawai'i has long been accused of chasing out its best and brightest, and it can only be exacerbating that problem with these new tax rates."

It also criticized the hotel room tax increase as foisting new taxes on nonresidents who have no political power within the state and said Hawai'i's cigarette tax increase to $2.60 a pack will be second only to New York's $2.75.

It also noted Hawai'i could cut the number of tax brackets in half and achieve the same results. It said having a complex structure can be confusing to taxpayers.

Lawmakers said some of the increases will expire in six years and may be repealed sooner if the state's economic picture brightens.