As a Christian leader, I consider paying taxes a matter of both my spiritual responsibility and my personal civic duty.

Ultimately, we all benefit from the taxes as they contribute to the common good by funding housing, roads, public health programs, education, environmental programs, police and fire protection, programs that support children and families, and all of the other governmental functions that support and strengthen our communities. Taxes provide the means to build a stronger community and ensure a healthy future.

As part of the community and participants in the common good, corporations as well as individuals are called upon to pay taxes. In Hawaii, however, there is an exception. Certain corporations, called Real Estate Investment Trusts (REITs), avoid Hawaii’s corporate tax due to an unfortunate loophole in the law. Fortunately, however, this loophole can be fixed and justice served. A bill making its way through the Legislature, Senate Bill 301, would require REITs to pay Hawaii’s corporate tax.

Hawaii’s corporate tax is a tax on the profits made by corporations. REITs have been exempted because the state simplified the administration of state tax law by voluntarily adopting most of the federal Internal Revenue Code. In the federal REIT model, profits made by a REIT are distributed to its shareholders, and the shareholders pay federal and state taxes on those profits in the states where they live.

REIT shareholders live all over the country. From the perspective of the federal government, it does not matter in which state these shareholders live because federal tax law applies to the entire country.

From Hawaii’s perspective, however, the federal model is deficient because 99% of the shareholders of REITs with properties in Hawaii live outside of Hawaii. They pay taxes in other states, so Hawaii loses out on most of the taxes on REIT profits. The current system does not serve the common good of the people of these Islands, and it is our people who suffer.

The taxes that Hawaii fails to collect is substantial. Approximately 40 REITs own income-producing properties in Hawaii, such as Ala Moana Center, the Hilton Hawaiian Village Resort, and Bishop Square. The properties are worth about $17 billion, and they annually earn an estimated $1 billion in profits. Applying Hawaii’s corporate tax rates, REITs would annually pay a total of about $60 million in corporate taxes.

Not surprisingly, those who benefit most from REITs oppose the two bills. The claim is that the bills would inhibit investment in Hawaii. However, experience in other states shows otherwise. New Hampshire, for example, passed a law 20 years ago that requires REITs to pay its corporate tax, and REITs continue to invest in New Hampshire.

Today, there are 35 REITs that own 800 properties in New Hampshire. Certainly, that would be true here as well and would add to the long-term common good of our state.

Hawaii’s preferential treatment of REITs should be revoked by closing the tax loophole. For the sake of justice, the common good, and our shared moral responsibility, Hawaii’s corporate tax should be applied to REITs, as it does to all other corporations.

The resulting increase in tax revenue should be used to fund the things that make our communities safer and healthier places in which to live for all the children of God in these Islands.

The Rt. Rev. Robert L. Fitzpatrick is bishop of the Episcopal Diocese of Hawaii.