The article in Tuesday’s paper about possible property tax revisions and the letter to the editor in the Oct. 1 West Hawaii Today also addressing the policing of the homeowners exemption have prompted me to write about our property tax structure. I believe there is a fundamental principle that should underlie good tax policy: The tax should be paid primarily by those who benefit from the revenue it generates. Applying this principle to our property tax system leads me to conclude it is very unfair and counterproductive.
Our property tax is the primary source of revenue for county services. The primary beneficiaries of those services are those of us who live here. As much as I benefit from the homeowners exemption, especially as I’ve gotten older, it makes no sense to me from a policy perspective.
It increases the relative tax burden on rental properties. This may be politically popular, but only because the average renter doesn’t realize he is paying these taxes indirectly through a higher rent — a lower property tax burden would translate into a lower rent.
It shifts the tax burden from East Hawaii to West Hawaii. The exemption is a larger percentage of the assessed value in areas where the average home value is less. For example, a $60,000 exemption reduces the tax burden on a $180,000 home in Hilo by one-third. If the same home on a similarly sized lot in Kona were valued at $240,000, the exemption would only reduce the burden by one-fourth. The Hilo homeowner pays about $740 per year, while his Kona counterpart pays about $1,100. Hence, a home worth one-third more pays 50 percent more in property taxes.
It shifts the burden from those of us who live here and enjoy the benefits that our local government provides to those part-time residents who spend less time here and place much less burden on government services. The new higher rate of tax on high-value residential properties that don’t qualify for a homeowners exemption is particularly egregious. Snowbirds and other part-time residents with high-value homes have seen their property taxes increase by almost two-thirds over the past year — last year’s $6,000 tax bill has become $10,000 this year. These folks don’t have a vote in the elections, but they can and do vote with their feet. Many may view this as an indication that they are not welcome here, and they may well look to other locations where they are not subjected to such disparate tax treatment. We benefit much more from these part-time residents — particularly those who decide to support causes within our communities — than we do from the tourism we so actively promote.
So I urge our County Council and the Stakeholder’s Task Force to rethink the current property tax structure. I don’t believe that increasing the homeowners exemption and saving homeowners $10 per month will make a significant difference to homeowners. Rather, a lower rate for all residential properties, without a homeowners exemption, that was designed to generate the same amount of revenue would be a better tax policy for our island.
I would also suggest that the tax rates for agricultural and other undeveloped property should be lower than for developed residential and commercial properties. Reducing the property tax on these properties reduces the incentive for their development, and they create relatively little need for county government services.
Bill Hastings
Waimea