Counties can afford, ought to prioritize property tax reduction

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By Keli‘i Akina

Nobody likes the thought of our county governments making the most of Hawaii’s excessive value of dwelling. 


However that’s what will occur quickly until we engineer some property tax reduction.

Because of greater property assessments statewide, Hawaii householders and others are dealing with large will increase of their property taxes. That’s as a result of the taxes are tied to property valuations, so if property values go up, so do property taxes.  

Keli‘i Akina

We might simply modify the property tax charges to offset the elevated valuations, however for some purpose, politicians appear to assume that’s simply too easy. 

Extra fairly, they are saying that price cuts may put them in monetary jeopardy if property valuations go down in future years. But when that unlikely occasion ought to ever happen, they might simply transfer the charges again up once more.

One purpose it has been tough to make any progress on this difficulty is that many individuals are likely to get distracted by why Hawaii housing costs are so excessive to start with.

Two week in the past, I used to be on PBS Hawai‘i’s “Insights” program, the theme of which was supposed be about whether or not there could be any reduction for “rising property taxes on Oahu.” 

Sadly, it appears there was extra discuss whom we must always blame for Hawaii’s excessive property valuations — whether or not out-of-state traders, empty properties or different handy scapegoats — than any targeted dialogue about tips on how to present significant taxpayer reduction. 

Simply to be clear, the principle purpose for Hawaii’s excessive dwelling costs is that we don’t have sufficient properties. Additional, the scholarly proof is just about unanimous that the state’s acute housing scarcity is the results of too many laws on homebuilding. 

Then there have been the often-heard claims that our property tax charges in Hawaii are the bottom within the nation, so why all of the complaining? 

Properly, sure, as I’ve defined earlier than, Hawaii does have low property tax charges, however that’s solely half of the story. The opposite half is that due to excessive property values, the quantity Hawaii residents pay in property taxes is nearer to the center of the pack on a state-by-state foundation.

However to the purpose in regards to the low charges: Why are they so low in Hawaii?

Primarily, it’s as a result of Hawaii is the one state within the nation that funds its public faculties by way of the state normal fund. All over the place else, they’re funded by way of native property taxes. 

In different phrases, Hawaii’s 4 counties don’t have to spend their property tax revenues on education for Dick and Jane. They’ve to fret about solely the same old county capabilities, comparable to police, firefighters, infrastructure and some different issues. The less issues they do, the decrease the property tax charges will be. 

Lastly, there’s the idea that property tax will increase will be structured to have an effect on solely the rich. Nonetheless, that’s not how an economic system works. While you make one thing dearer, whether or not it’s a home or a bottle of soda, everybody experiences the impression. 

Contemplate Oahu’s “Residential A” property tax classification. Enacted in 2013, this class applies to non-owner-occupied properties valued at $1 million or extra. 

A preferred sentiment again then was that anybody who owns such a house ought to must pay a better tax. But when that second house is being rented out, guess who’s going to finish up paying the upper tax invoice? 

And now, too, after all, due to inflation and the housing scarcity that retains pushing up dwelling costs, even the typical Oahu house is price about $1 million. 

So the Residential A tier doesn’t apply anymore to only rich traders with second properties. It additionally covers longtime Hawaii residents who could be renting out their late mother and father’ properties to native households on a long-term foundation. 

And for the reason that property assessments for Residential A simply went up by 39.9%, the Hawaii residents — identical to the extra rich traders — most likely can have little alternative however to move alongside that new value to their tenants who already are struggling to make ends meet. 

And we marvel why so many Hawaii residents have been leaving for the mainland.

Amazingly, there are some good concepts floating round on the numerous county councils proper now. My colleagues on the Grassroot Institute of Hawaii have testified earlier than all of them in favor of property tax rebates, exemptions, credit, budgetary restraint and, sure, even decrease tax charges. A lot of these proposals appear to be they’re going to undergo.

Regardless of speak that the counties can’t afford to chop taxes proper now, the reality is that they will. The secret is to carry tight on the spending — simply as most Hawaii residents have needed to pull their belts tighter as effectively. 

Our counties actually shouldn’t be trying to spend extra due to anticipated income triggered by the upper property assessments. A housing disaster and hovering property values shouldn’t be an excuse for a spending spree. 


Keli‘i Akina is president and CEO of Grassroot Institute of Hawaii.