Rare tax cuts proposed

  • Richards

HILO — Kohala Councilman Tim Richards is attempting something that rarely happens in Hawaii County government — he wants to lower taxes.

Measures to be heard Monday by the County Council Finance Committee would lower rates for both property tax and fuel tax.

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Richards is offering the tax cuts as a way to make a half-cent county surcharge on the state general excise tax more palatable. A sharply divided council last week voted 5-4 to postpone the proposed GET increase until January.

Richards reasoned that lowering property and fuel taxes while raising general excise taxes would shift more of the burden to visitors. Taxes on tourists are collected only by the state, with $19.3 million of transient accommodations tax passed on to the county.

“Our citizens would have the increase in their taxes from the GET offset by a decrease in their (property tax) and (fuel tax). The net effect is approximately zero,” Richards said in a statement. “An additional $10 million projected from GET would mostly come from our visitors. This increased tax collection primarily from outside the county could be a win for the county.”

Mayor Harry Kim’s administration opposes the tax cuts at this time. Even if the GET is eventually passed, it would return only about $7.5 million to the general fund, because the GET must be used for transportation projects, Finance Director Deanna Sako said. The Legislature had been ready to expand 40 percent of the tax for other county purposes, but changed the bill during last-minute negotiations at the end of the session.

Without the GET offset, the county falls further in the hole, Sako said.

“Given the fact they’ve postponed the GET, I think both of these are inappropriate at this time,” Sako said Wednesday.

The mayor’s proposed $518 million budget relies on increases in property values, landfill tipping fees and housing grants to reach its new historic level, a 5.5 percent increase over last year. The council will be taking it up Tuesday.

It’s been a dozen years since property taxes were lowered. An across-the-board average 12.6 percent decrease in rates proposed by Kim was passed by the County Council in 2006.

Since then, tax rates have risen steadily, even as property values increased as well.

“It is my responsibility to provide my constituents the best possible fiscal oversight of the county budget,” Richards said Thursday. “All of our introduced measures will be used to help with the conversations concerning next year’s budget.”

Richards wants to lower rates for all but the affordable rental housing and homeowners classes; categories that were spared during last year’s round of tax hikes. The drop in taxes would cost the county $10.3 million.

He also wants to lower fuel taxes by 5 cents a gallon starting in the fiscal year that starts July 1, then another 9 cents next year, bringing it to 14 cents per gallon both years when automatic increases are taken into account.

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Fuel taxes were raised by 6.2 cents a gallon last year, with incremental 4-cent-per-gallon increases kicking in automatically, under legislation passed last year by the council.

Resolution 615, lowering property taxes, and Resolution 616, lowering fuel taxes, are scheduled to be heard by the Finance Committee at 10:30 a.m. Monday in Hilo council chambers. The public can also participate through videoconferencing at the West Hawaii Civic Center, Waimea and Pahoa council offices, old Kohala courthouse and Naalehu state office building.