Race-Based Tax Exemptions Are Unconstitutional

by Ilya Shapiro, CATO Institute Oct 17, 2011

Hawaii continues to think that it’s not quite part of the United States and thus not fully subject to U.S. law.

In the 2000 case of Rice v. Cayetano, the Supreme Court struck down race-based voting requirements for certain Hawaii state officers because government schemes that distinguish between “native Hawaiian” and “Hawaiian” are racial classifications that must pass “strict scrutiny” to be deemed constitutional; they must be narrowly tailored to achieve a truly “compelling” purpose (a standard nearly impossible to meet). Yet that exact same category of “native Hawaiian” — whose frighteningly archaic definition is “any descendant of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778” — was used in the Hawaii Homes Commission Act to distinguish those who can hold certain leases that are subject to little or no property tax.

A group of Hawaiians (Ilya Shapiro means Hawaii residents—Editor.) who do not meet the state’s definition of “native Hawaiian” and therefore suffer under the explicitly race-based law decided to challenge these property-tax exemptions. After paying their taxes, these plaintiffs sought refunds on the grounds that the classification scheme violates the Fourteenth Amendment’s Equal Protection Clause.

The Supreme Court of Hawaii, however, ruled that they didn’t have standing — a legal doctrine that determines who can bring a claim — to challenge the taxes on the ground that they had not yet asked for the leases (for which they were indisputably ineligible due to not having enough “blood of the races” flowing through their veins). A lower state court had even ruled that the classification was not race-based—that it merely distinguishes leaseholders and non-leaseholders, even though Hawaiians without the sufficient “blood quantum” cannot be leaseholders!

The group of taxpayers now seek review in the U.S. Supreme Court. Cato, joined by the Pacific Legal Foundation, the Grassroot Institute of Hawaii, the Goldwater Institute, and Professor Paul M. Sullivan, filed a brief urging the Court to take the case and rectify Hawaii’s explicitly unconstitutional taxation scheme. We argue that, after Hawaii’s state judiciary refused to address the issue of racial discrimination head-on, only the U.S. Supreme Court is in a position to guarantee the constitutional protections that Hawaiians have lived under for over a century (since Hawaii became a territory). Only by taking this case and overturning the racially charged definition can the Court continue to ensure that Hawaii is a state that “neither knows nor tolerates classes among citizens.”

The Supreme Court will likely decide by the end of the year (or in early 2012) whether to hear this case, Corboy v. Louie.

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Editor’s Note >>> Here’s why discounted DHHL Property Tax rates would be upheld if SCOTUS agrees to hear this case: Supreme Court ruling shields Hawaiian Homelands and ceded lands revenue

The akamai reader will note that the April, 2009 Ceded Lands ruling was decried by every race-hustling OHA crony in Hawai’i, yet it is this very Ceded Lands decision which cements the protection of DHHL against discrimination suits and likewise cements the five purposes for Ceded Lands revenues, one of which is “the betterment of Native Hawaiians.”

And, yes, Hawai’i Free Press is the ONLY media outlet in Hawai’i where this is explained.

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Taxpayers of the Wrong Race: Corboy v. Louie

by Ralph W. Kasarda, Pacific Legal Foundation

Imagine if a state were to enforce a tax scheme that resulted in property owners paying different tax rates–not based on the value of their property–but on their race. Further imagine state courts rejecting a challenge to this discriminatory practice by refusing to consider the equal protection issue.

Sound inconceivable in this day and age?

Welcome to Hawaii, where the state and its counties enforce race-based property tax schemes, and the state supreme court recently affirmed the dismissal of a challenge to the laws by avoiding the equal protection claim. That decision is here.

To bring an end to Hawaii’s race-based tax schemes, PLF filed an amicus brief this week in the U.S. Supreme Court asking it to review Hawaii’s tax laws in a case called Corboy v. Louie. Joining PLF in its brief are the Cato Institute, the Grassroot Institute of Hawaii, the Goldwater Institute, and Professor Paul M. Sullivan.

In 1921, when Hawaii was still a U.S. territory, Congress passed the Hawaiian Homes Commission Act, setting aside land to be used as homestead property exclusively for native Hawaiians. The Act’s purpose was to encourage individual native Hawaiians to take up farming by providing them with a homestead lease at the rate of $1 per year, for 99 years. Congress required Hawaii to adopt the Act in its constitution as a condition of statehood in 1959.

The Act, now incorporated in Hawaii’s constitution, exempts lease holders from paying all property taxes for the first seven years of the lease. Each of Hawaii’s four counties extend the exemption, or levy only nominal rates, for the entire duration of the lease. As a consequence, the annual property taxes paid by nonnative Hawaiians are higher than the amounts paid by many native Hawaiians.

The problem is that the Act defines a “native Hawaiian” specifically in racial terms: A “native Hawaiian” is “any descendent of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778.”

In Corboy v Louie, nonnative Hawaiians paid their property taxes under protest and filed an action alleging the lease exemptions violated the Equal Protection Clause. But the Tax Appeal Court dismissed their challenge on the grounds that the tax exemption is based on whether a taxpayer is a homestead lessee, and not on a taxpayer’s race. On appeal, the Supreme Court of Hawaii avoided the equal protection claim and held petitioners lacked standing to challenge the tax exemptions because they never applied for homestead leases. Of course, both courts ignored the fact that petitioners are ineligible for the homestead leases because they are taxpayers of the wrong race.

This is not the first time PLF attorneys have become involved in Hawaii’s unconstitutional racial classifications. PLF filed an amicus brief in Rice v. Cayetano, where the Supreme Court held the term “native Hawaiian” is a racial classification and that a state voting scheme prohibiting nonnative Hawaiians from voting on certain matters violated the Fifteenth Amendment. PLF also filed an amicus brief in Hawaii v. OHA, a case concerning state sovereignty where the Office of Hawaiian Affairs contended that “native Hawaiians”–again defined by race–have exclusive rights to certain public lands. The Court resolved the case without addressing the equal protection issue.

As Justice O’Connor stated in her dissent in Metro Broadcasting., Inc. v. FCC, racial classifications “endorse race-based reasoning and the conception of a Nation divided into racial blocs, thus contributing to an escalation of racial hostility and conflict.” Let’s hope the Supreme Court agrees to hear this case and requires Hawaii to abandon its racial classifications and treat its citizens with the equality to which they are all entitled under the Constitution.

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Ralph W. Kasarda wrote this for the Pacific Legal Foundation - America's premiere freedom-oriented public-interest legal organization, fighting in the nation's courts for private property rights, economic freedom, racial equality and a balanced approach to environmental regulation.