But Lingle ultimately vetoed House Bill 444, saying, “I am vetoing this bill because I have become convinced that this issue is of such significant societal importance that it deserves to be decided directly by all the people of Hawaii.”
More than 13,000 – that is the number of letters that Gov. Linda Lingle said she had received on the proposed civil union legislation that would have allowed the state government to confer tax benefits or penalties based on domestic partnerships.
LAMBDA, a gay, lesbian, transgender and bisexual rights organization based in California in conjunction with the Hawaii ACLU, led the charge in Hawaii to get legislators to vote for the bill in the name of “equality.” These groups also threatened a discrimination lawsuit against the State if the law was not passed.
Meanwhile, social conservative groups and Christian church leaders lobbied against the measure.
Over the last year, there have been emotionally charged rallies on both sides of the issue. But one of the main concerns was the economic impact of the bill.
This was one of the deciding factors for the governor’s veto.
Hawaii already passed a Reciprocal Beneficiaries law in 1997, providing benefits to same-sex and other partners. The difference between the 1997 law and the 2010 civil unions legislation was that the new law would have required a ceremony after a license is issued. The status of the civil union would then be recorded in the State registry as a vital statistic.
The cost of a Reciprocal Beneficiary certificate is $8, while a civil license would have cost $60. Reciprocal Beneficiaries may dissolve their union by sending in a form to the Department of Health, along with a check for $8. Under civil union legislation, civil partners would have to go to Family Court under existing divorce laws to dissolve their partnership.
The Impact of Civil Unions on Hawaii’s Economy, a report released earlier this year by the University of Hawaii Economic Research Organization, University of Hawaii, concluded that Hawaii’s civil union legislation, HB444, would affect the State’s economy only minimally.
The report concludes:
- 3,262 same sex couples currently live in Hawaii. Hawaii’s population is nearly 1.3 million.
- A projected 1,962 same sex couples will enter into civil unions in Hawaii between July 2009 and June 2015.
- Tourism by same sex couples travelling to Hawaii for civil union ceremonies or honeymoons may increase tourism spending by as much as $300,000 annually.
- State revenues will increase due to civil union registration fees ($60 per license) and additional general excise taxes from visitor spending, while cost for new forms and Department of Health staff training will be minimal.
- State and County governments will not have higher health insurance expenses, because State and County workers who are domestic partners are already covered under the government health plan.
Sen. Sam Slom (R-Hawaii Kai) believes that the report minimized the true impact of the Civil Unions bill on the State’s economy. “The State’s pension and retirement systems, unemployment compensation and the courts are already in turmoil. Where is the extra money going to come from?”
Civil Union Partners Face Marriage Tax Penalty
Married couples in Hawaii often face a marriage penalty tax under the State’s progressive income tax structure. Couples choosing to enter into civil unions would have been subjected to the same penalty, especially if each partner was working, incomes were similar, and their incomes were taxed at less than the maximum marginal tax rate.
In Hawaii, most civil union couples would pay a civil union tax due to the high number of same-sex couples that are employed, according to report. Therefore, state income tax revenues may have risen due to this civil union tax penalty.
Rep. Barbara Maramoto (R-Waialae Iki), who voted for the bill, cautions, “If there are financial drawbacks to joining in a civil union, individuals may want to consider that before ‘tying the knot.’”
Health Insurance for Civil Partners Not Tax Deductible under Federal Law
If a civil union partner chooses to include his or her partner under their health-insurance plan, premiums paid for by the employee under federal law would not be tax deductible.
The University of Hawaii report concludes that the number of citizens receiving health insurance coverage is unlikely to increase under the new law, due to very few same-sex couples in Hawaii likely to choose civil unions. More than 92 percent of the State’s residents are already covered by insurance and the statistically small percentage of same-sex couples who sign up their partners for health insurance when offered by an employer.
Rep. Tom Brower (D-Waikiki) says the civil unions bill intended to give homosexual partners as well as heterosexual partners choices: “This allowed for a same-sex partnership, except without the ‘name-only’ of marriage.”
Private Companies and Individuals Pay More for Civil Union Employee’s Health Insurance
Private companies offering health coverage may pay additional federal taxes due on health insurance. Employers must report the fair market value of their contribution towards same-sex partners as taxable wages earned.
Jack Schneider, president of JS Services, a payroll services provider in Honolulu says, “Benefits are taxed as income that must be itemized on W-2 forms. Taxes on those benefits must also be itemized. Businesses are waiting to see how this law will affect them and how much it will cost us.”
Complicating tax issues, same-sex partners must pay for health insurance premiums from after-tax income.
This means that the cost of a civil union partner’s health insurance is higher than if paying for a married spouse due to higher federal, state, social security and Medicare taxes on the full premium.
A 2007 study, Unequal Taxes on Equal Benefits, by Lee Badgett, found that domestic partners pay an average of “$1,069 per year more in taxes than would a married employee with the same coverage.” A Hawaii employee who pays a 35 percent tax rate would pay an estimated $2,525 in additional taxes based on an annual health insurance premium of $7,213.
Benefits of Civil Unions in Hawaii versus other States
In other states, private employers that self-insure may not be required to offer health insurance to civil union partners of its employees, because the provisions of the federal ERISA legislation and the federal Defense of Marriage Act may restrict health care access to civil union partners. Hawaii is the only exception, where the Hawaii Prepaid Healthcare Act preceded the passage of ERISA.
However, same-sex couples who marry or enter into domestic partnerships in all states that currently allow same-sex marriage or domestic partnerships are not eligible for federal housing, food stamps, or social security benefits provided to spouses. They are not treated as spouses by the federal government for tax purposes, bankruptcy, inheritance, student or agricultural loans.
Unintended Consequences of Civil Unions Law
Brower speculates that government may have initially involved itself in the institution of marriage, giving tax breaks as a way to build functioning family units, but that ideally there should one day be a separation of church and state.
“At some point, let’s say when there are 25 states with civil union laws, there may be a ‘tipping point,’ where the federal government will have to change its laws,” Brower says.
Dick Rowland, president emeritus of the Grassroot Institute of Hawaii says this law and others represent the “unintended consequences” of the government giving privileges to married people, which has resulted in this inequity. “Perhaps, one day, laws giving privileges to special groups will be found to be unconstitutional.”
Laura Brown is a capitol reporter and researcher for Hawaii Reporter