by Andrew Walden

Governor Lingle Tuesday vetoed HB2866, which would reestablish the Hawaii Death Tax.

It is well known that the Death Tax hits those who are unaware of estate planning.  Such people are often the “blue collar rich” – farmers, mechanics, contractors, restaurateurs, landlords, and other small businesspeople who worked their way up and may not be tuned into the details of estate law.  Also hit, owners of Hawaiian kuleana plots and other Hawaii landowners who may not be aware of their holdings’ value or similarly may not be aware of estate planning.    

By targeting the Hawaii assets of foreign citizens as subject to seizure to satisfy the Death Tax, the State’s land grab takes on whole new dimensions.  How many residents of Japan, Canada, or other countries—owning Hawaii property--are aware of the details of American Estate law?  Probably not very many.  But starting this week, if the Governor’s veto is overridden, their assets could be subject to seizure to satisfy a 55% death tax.  Properties or businesses worth more than $3.5 million would be taxed.

As this becomes known, it could retard the sale of retirement homes to foreign nationals, thus killing jobs and depressing the real estate market.  Also hit, the estates of non-US citizens who die in their home country after building assets in Hawaii—even if their children are US citizens living in Hawaii running their parent’s business.  This could reduce the willingness of foreign nationals to invest in Hawaii-based businesses.

As usual, the Hawaii legislature is looking to steal property from its rightful owner to feed the HGEA.  In this case, productive capital assets would be liquidated to burn as government employee wages. 

The governor’s veto message for HB2866 and other April 27th vetoes are below.

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RELATED: VIDEO: Hawaii Senate Committee considering retroactive 55% Death Tax 

Governor’s veto message Dated April 27, 2010

Pursuant to Section 16 of Article III of the Constitution of the State of Hawaii, I am returning herewith, without my approval, House Bill No. 2866, entitled A Bill for an Act Relating to taxation.”

The purpose of this bill is to reestablish the Hawaii estate tax on property, holdings, and assets of persons who pass away after April 30, 2010.  This measure also taxes non-citizen and non-resident assets in Hawaii. 

The bill is objectionable because it would effectively increase taxes on those most likely to invest in businesses and properties in Hawaii.  It would also impose a tax on families with valuable land holdings who may not be wealthy, but whose estate meets the statutory thresholds.

Hawaii has not had an estate tax since 2005, when the federal credit for state death taxes was eliminated by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).  Moreover, there is also no federal estate tax for tax year 2010 as a result of EGTRRA.  This measure targets individuals who are most capable of stimulating Hawaii’s economy, and provides a disincentive for residents and non-residents looking to accumulate capital in the State or invest in the State.

Moreover, it is unfair to apply this estate tax to persons who die after April 30, 2010 with little notice or time to inform the public.  This measure does not provide enough time for individuals to adequately plan their estates or modify their current estate plan.  It would be unfortunate if a person who passes away on May 1, 2010, who may or may not know of the estate tax’s existence, cannot distribute his estate as planned to his heirs and charities.

For the foregoing reasons, I am returning House Bill No. 2866 without my approval.

Respectfully,

Linda Lingle

Governor

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GOVERNOR’S BILL ACTION REPORT  April  27, 2010

Governor Linda Lingle has vetoed the following bills:

HB2085 HD1 SD2

Veto Date: April 25, 2010

RELATING TO HEALTH.

Disrupts the State’s ability to oversee Medicaid contracts that provide health care services to Hawai‘i’s neediest population by prohibiting the current director of the Department of Human Services from soliciting contracts for QUEST health insurance plans.  A news release on this veto is posted at www.hawaii.gov/gov/news .

HB2086 HD2 SD2

Veto Date: April 25, 2010

RELATING TO HEALTH CARE DATA.

Would prematurely allow for the sharing of a patient’s clinical laboratory test results without adequate safeguards to protect the privacy of the patient.

HB2421 HD2 SD2 CD1

Veto Date: April 25, 2010

RELATING TO GOVERNMENT.

Extracts $22 million per year from Hawai‘i residents by imposing a barrel tax on petroleum used in the State, without materially changing the ability of the State to meet its energy independence and food security goals.   A news release on this veto is posted at www.hawaii.gov/gov/news .

HB2866 HD1 SD1 CD1

Veto Date: April 25, 2010

RELATING TO TAXATION.

Reinstates the Hawai‘i estate tax, also known as the death tax, on persons who pass away after April 30, 2010 and applies the tax to non-residents.

SB2159 HD1

Veto Date: April 25, 2010

RELATING TO TRAFFIC ABSTRACT FEE.

Raises the Traffic Abstract Fee by 186 percent, adversely impacting drivers and businesses.

SB2650 SD2 HD2 CD1

Veto Date: April 25, 2010

RELATING TO THE DEPARTMENT OF HUMAN SERVICES.

Prevents the Department of Human Services from implementing a statewide program to improve the services it provides to applicants for public assistance.

The Governor's statements of objections are attached and posted at: www.hawaii.gov/gov/leg/2010-legislative-session/bills/veto.html .

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