Does Hawaii need larger tax cuts for its wealthiest families? That’s just what the Legislature plans to do with House Bill 2653. As someone who comes from a family that would benefit from the passage of this bill, I feel the need to blow the whistle and sound the alarm.
My family raised me to believe in fairness. And there is nothing fair about the fact that Hawaii’s lowest-income households pay a larger percent of their income in state taxes than the wealthiest families pay — even with the current estate tax. This bill would make our tax system even more unfair, at a time when close to half the households in Hawaii are living paycheck to paycheck.
While some of our state’s wealthiest families think of themselves as the “safety net” for the community, the fact is that the community has provided the foundation upon which these heirs have accumulated their wealth over generations.
These large businesses rely on workers educated by the state with public funds; business owners profit off their educated labor and accumulated wealth.
State taxpayers also built the roads and other infrastructure needed to transport the goods that these family businesses sold at a profit and accumulated wealth on.
Keep in mind, income tax is paid by workers on the wages they earned; general excise tax is paid by customers from the wages they earned. While a portion of state revenues come from taxes on corporate profits, there are many loopholes to minimize those contributions.
I know from experience that successful business owners invest in life insurance policies, with payouts calculated to cover the precise amounts of taxes that attach to their estates — so their passing does not impact the operation of their family businesses.
These bills will not “save” these wealthy families from bankruptcy; it would just put more spending money into their designer handbags.
The estate tax is a tax on the ultra-rich, affecting only those in the top 0.2%, or the richest two out of 1,000 people. In other words, most small businesses are already shielded from the estate tax.
Currently, a single person can pass on an estate worth $5.5 million tax-free, and a couple can pass on $11 million. After that point, the estate tax is applied only to the amounts above those exemption levels. So, a couple passing on an estate worth $12 million would pay $100,000 in estate taxes, which is a rate of less than 1%.
HB 2653 would more than double the size of an estate that can be passed down tax-free to $13 million for a single person and $27 million for a couple, as well as entirely exempt family- owned businesses from the estate tax.
Recent polling shows that 2 in 3 Hawaii voters believe elected officials care more about “wealthy donors” than the “needs of their communities.” If our legislators pass HB 2653, they will have proved those voters right.
As one of the wealthy supporters of this bill reminded legislators during a hearing: “If you go to any fundraiser, you will see Hawaii family businesses.”
It is incredibly tone deaf to give huge tax breaks to Hawaii’s wealthiest heirs when the Legislature is facing so many urgent needs in our community, first and foremost the recovery of West Maui. We do not need more tax loopholes and bigger tax breaks; we need to simply pay our fair share of taxes.
Kim Coco Iwamoto grew up washing cars, serving beverages and processing reservations at the company her grandparents founded, Roberts Hawaii, which the family later sold to employees; Iwamoto recently co-founded the Chamber of Sustainable Commerce.
