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It’s no secret that Hawaii’s family-owned businesses are disappearing. You can’t get locally grown eggs from Wahiawa-based Peterson’s Farm. Or beef cutlet at Like Like Drive Inn. Or crack seed at Samurai Snacks. These iconic family-owned Hawaii businesses are gone.

A recent opinion piece in Civil Beat uses sleight of hand to suggest that a bill to protect Hawaii’s family-owned businesses () will somehow put our state’s safety-net programs at risk or increase poverty. Neither suggestion is true.

We hope Hawaii residents and legislators won’t be misled by this piece (“What Do Estate Tax Cuts For The Wealthy Say About Hawaii’s Priorities?”). Instead, we believe the bill will strengthen the economy by helping local businesses continue to create jobs, generate tax revenue and donate to local nonprofits.

Each of us works in a family business that we’re working to preserve for the next generation. But we’re worried. That’s because Hawaii’s laws make it surprisingly difficult to keep family businesses in the family.

The reason? Our state is one of the few remaining in our country that require family members who inherit a business to pay an estate tax. In Hawaii, after the owner of a family business dies, their heirs must make a large cash payment, up to 20% of the value of the business, just to hold on to the company.

This creates painful situations, requiring surviving family members to consider selling the business, or portions of it, just to keep the company going. Most family businesses don’t have lots of cash on hand. All of us continually put our profits back into our businesses — hiring new workers, opening new locations and investing in new equipment.

Staying Competitive

One of our family businesses is a good example. Hamai Appliance, founded in 1969, employs 24 people on Maui. The business competes with large public companies like Home Depot, Lowe’s and Amazon. To stay competitive, Hamai Appliance reinvests its profits into inventory and well-trained staff.

The Hamai family doesn’t have easy options for raising money to pay the estate tax. It could sell parts of the business. Or borrow so much money it endangers the business. Or it could sell the entire business to a mainland competitor. Each of those options would almost certainly lead to fewer jobs and less tax revenue for the state.

All of us know fellow business owners who are seriously considering moving out of state to avoid the estate tax. If they do, Hawaii wouldn’t just lose out on their estate tax revenue, but also the revenue from their income taxes, property taxes and excise taxes.

that a retiree who moves out of state five years before their death to avoid the estate tax ends up costing their state 1.73 times as much revenue as they would have paid in estate taxes.

That’s why 38 other states have repealed their estate tax in recent years. Applying the estate tax to family businesses is a lose-lose policy.

The only ones who benefit from Hawaii’s estate tax are large public companies, typically owned by non-local entities. They aren’t required to pay the tax, so they can use that money to continue investing in their businesses.

Meanwhile, the estate tax drains their competitors of cash and forces many of them to close. It’s no wonder so many of our state’s homegrown companies are struggling to survive.

It’s important to note that HB 2653 doesn’t even repeal Hawaii’s estate tax. Under the bill, family members who inherit large bank accounts or big stock portfolios will still be required to pay the estate tax.

Instead, the proposed bill is narrowly targeted to exempt the family business. These include companies like Hamai Appliance, Kamaka Ukulele, Liliha Bakery and McCully Bicycle & Sporting Goods.

Businesses like these are central to economic growth in our state — generating jobs and serving local consumers in ways that mainland businesses can’t. Allowing them to thrive results in those businesses paying much more in recurring income taxes and excise taxes than a destructive, one-time estate tax.

That ongoing revenue can be used to fund social services. Family businesses also play a unique role in civic life — donating time, money and expertise to local nonprofits.

We urge Hawaii legislators to support HB 2653 to help ensure that longtime Hawaii businesses like ours can survive and flourish.