The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Finance on March 3, 2026.
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March 3, 2026, 10 a.m.
Hawaii State Capitol
Conference Room 308 and Videoconference
To: House Committee on Finance
Rep. Chris Todd, Chair
Rep. Jenna Takenouchi, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: TESTIMONY OPPOSING HB2148 — RELATING TO THE ESTATE AND GENERATION-SKIPPING TRANSFER TAX
Aloha Chair, Vice Chair and other Committee members,
The Grassroot Institute of Hawaii opposes HB2148, which would decrease the estate tax exclusion from $5.49 million to $3 million for estates that do not include an owner-occupied property or a bona fide farm.
The bill would also impose a 3% surcharge on property in which the transferee’s basis exceeds $2 million, although transfers of small businesses and bona fide farms to family members who intend to continue operating the business or farm would be exempt from this surcharge.
It is important to note that only 12 states have estate taxes. And among those that do, Hawaii is already tied with Washington state for having the highest estate tax rates — with both states topping out at 20% for certain estate values.[1]
Research has shown that the estate tax can lower business investment and harm job creation.[2] So in essence, both of these tax code changes would make Hawaii a less attractive state in which to do business.
The estate tax is especially unfair to family businesses, farms and ranches, since C corporations are legal entities that cannot die and thus do not have to pay the estate tax.
Making matters worse, Hawaii’s estate tax threshold is also relatively low — $5.49 million per individual versus $15 million at the federal level.[3] And once the threshold is exceeded, Hawaii’s rates kick in at anywhere from 10% to 20%, depending on the value of the estate, as the table below shows.[4]
| Estate value | Marginal rate |
| $5,490,000 – $6,490,000 | 10% |
| $6,490,000 – $7,490,000 | 11% |
| $7,490,000 – $8,490,000 | 12% |
| $8,490,000 – $9,490,000 | 13% |
| $9,490,000 – $10,490,000 | 14% |
| $10,490,000 – $15,490,000 | 15.70% |
| Over $15,490,000 | 20% |
Because land values are so high in Hawaii, many businesses fortunate enough to own their own building are easily close to the $5.49 million threshold by simply existing — regardless of whether they are turning a profit or have large cash reserves.
Decreasing the threshold to $3 million would make the tax apply to many more small businesses, which would hurt their chances of continuing to exist. For context, a 10% tax bill on a $4 million set of properties would result in a tax bill of $100,000, after the $3 million exemption has been taken into account. How many small businesses have $100,000 cash on hand to cover this tax bill?
Hawaii should instead look to increase the current $5.49 million threshold, which has not been changed since 2017. At least updating it to inflation would give Hawaii’s business owners and residents a bit more of a break.
Thank you for the opportunity to testify.
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] Andrey Yushkov, “Does Your State Have an Estate or Inheritance Tax?” Tax Foundation, Oct. 10, 2023.
[2] Pavel A. Yakovlev and Antony Davies, “How does the estate tax affect the number of firms?” Journal of Entrepreneurship and Public Policy, April 14, 2014; and Donald Bruce and John Deskins, “Can state tax policies be used to promote entrepreneurial activity?” Small Business Economics, Feb. 19, 2010.
[3] “IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill,” Internal Revenue Service, Oct. 9, 2025.
[4] “Hawaii Estate Tax Explained,” Valur Library, updated Nov. 3, 2025.
