June 29, 2012

Supreme Court denies review of Hawaii's race-based property tax scheme

By Supreme Court denies review of Hawaii's race-based property tax scheme

The U.S. Supreme Court today denied a petition for writ of certiorari in a case concerning Hawaii’s discriminatory race-based property tax scheme that forces non-preferred races to pay a higher tax rate.  The case is called Corboy v. Louie.

Here’s the background.  In 1921, when Hawaii was still a U.S. territory and not a state, Congress passed the Hawaiian Homes Commission Act, setting aside land to be used as homestead property exclusively for native Hawaiians.  The purpose of the Act was to encourage native Hawaiians to take up farming by providing them with homestead leases 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 states that an original lessee is exempt from all property taxes for the first seven years of the lease.  Each of Hawaii’s four counties extend those tax benefits for the entire duration of the lease.

Now that Hawaii is a state, the race-conscious homestead leases and tax-scheme violate equal protection.

A native Hawaiian is defined in the Act as “any descendent of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778.”  Twelve years ago, in Rice v. Cayetano, the Supreme Court held this definition of native Hawaiians is a racial classification and that Hawaii’s voting scheme prohibiting nonnative Hawaiians from voting on certain matters violated the Fifteenth Amendment.  So by virtue of their race, native Hawaiians are eligible for long-term homestead leases and tax exemptions.  As a consequence of Hawaii granting homestead leases over the years, thousands of native Hawaiians pay little or no annual property taxes while the property taxes paid by Hawaiian citizens of different races is approximately $1,000-3,000 higher.

The Supreme Court holds that all racial classifications are presumptively invalid and can be upheld only upon an extraordinary justification.  Such classifications are constitutional only if they are narrowly tailored measures that further compelling governmental interests.  Hawaii’s race-based homestead leases and tax exemptions have been in place since the 1920s, and it is unlikely they could survive strict judicial scrutiny.  The state supreme court rejected a challenge to the tax scheme without even reaching the merits of the equal protection challenge.  The Court’s refusal to review that decision is disappointing.

PLF filed a brief in support of the petition for writ of certiorari in this case with the Cato Institute, the Grassroot Institute of Hawaii, the Goldwater Institute, and Professor Paul M. Sullivan.

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