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Hawaii Dems want
compromise with GOP
for estate tax reforms

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By Helen Altonn
Star-Bulletin

U.S. Reps. Neil Abercrombie and Patsy Mink are looking to a Republican-Democratic compromise to achieve estate tax reforms since the House failed to override President Clinton's veto of a bill repealing the tax.

Hawaii's representatives were among 53 Democrats who joined Republicans yesterday in trying to override Clinton's veto, but the vote of 274-157 was 14 short of the two-thirds margin needed.

The bill's GOP sponsors argue that the "death tax" unfairly burdens small-business owners and family farmers wanting to leave their businesses to families.

Democratic opponents counter that the richest Americans would enjoy the tax benefit, and it would be better to raise exemptions for small businesses and farmers.

Abercrombie said he's been told Republican leaders are reluctant to talk to Clinton about the bill. But he said they should try to reach a compromise.

They can turn to the public if that doesn't work, he said. "But if they fail to make an attempt in the first place, I think people will see it as a political agenda."

Abercrombie and Mink said Hawaii residents are particularly hard hit by the estate tax.

Abercrombie said Hawaii has roughly 20 percent more businesses per capita affected by the tax than on mainland states because of the way property is evaluated.

"I think a considerable number of small businesses are in jeopardy there," he said by telephone from Washington, D.C.

"The irony of this is if we drive small businesses out of business because they don't have sufficient cash assets to pay inheritance tax, the beneficiaries will be only big conglomerates, merged corporations and big-box stores."

The very rich have foundations, trusts, attorneys and others "making sure the super-wealthy pay minimum, if any, taxes," he said.

"It's the ones caught in between, the entrepreneurial middle class that wants to continue businesses from generation to generation, and jobs associated with it that get hurt."

Mink said, "Clearly the estate tax has a deleterious effect on successful persons who hope to pass along homes to their children."

She said property values are highly inflated in Hawaii "and properties which would not result in any estate tax on the mainland are subject to estate tax in Hawaii.

"In 1997, the last year for which statistics are available, 2.5 percent of estates in Hawaii were subject to federal estate taxes, compared to only 1.9 percent nationwide."

Mink said she didn't vote to override Clinton's veto of the bill because she favors repeal of the estate tax, but to send a message to both parties that they must work for a compromise.

When the Republican bill was first considered, she voted for the Democratic substitute, which would have raised the exemption to $4 million, lowered the tax rate and taken immediate effect, she said.

The Republican bill did nothing to lower rates and wouldn't become fully effective for 10 years, she said. "That is too long for many people."

Abercrombie said it's not just a matter of family businesses affected by the tax but all those working for them who could lose their jobs.

He said one of the groups that convinced him of the importance of repealing the estate tax was the association of family-owned newspapers.

He said they told him if there isn't some relief from the inheritance tax, "every family-owned newspaper in the country will be driven out of business."