City touts tax break
for some residentsThose who do not rent out
any of their property would
enter a better classification
The city is proposing a break-up of the real property tax category for residential homeowners, with an eye toward giving owner-occupants who live exclusively on the property a tax break.
Gary Kurokawa, Real Property Tax Assessment Division administrator, acknowledged that the city would consider lower tax rates for those who do not rent out their property, an action made easier by breaking up the residential homeowner classification.
The City Council's Budget Committee held a special meeting yesterday on several bills aimed at determining who might be paying what amount of taxes.
Currently, owner-occupants qualify for a $40,000 homeowner's exemption; that amount is deducted from the assessed property value, and the homeowner is taxed on the balance. They include homeowners who rent no more than one room on the property.
"Nothing will change with these people (those who rent their property) except that the other people that are using it exclusively for their residence will be able to qualify to move into this homeowners classification," Kurokawa told the committee. "You can change the rates if you wanted to."
Kurokawa said the bill would bring Honolulu's classification in line with the other three counties, which also have a homeowners classification.
Robin Freitas, also of the Real Property Tax Assessment Division, said, "This is to set up potentially another means for the Council to set up a differential tax rate."
But some Council members are worried that homeowners who rent rooms for extra income will be unfairly penalized.
"It seems to me that we're just very much jeopardizing a lot of people who use their homes for their livelihood, and if they can no longer claim any of the home as the home, I have a lot of problem with that," Councilwoman Barbara Marshall said.
Council Chairman Gary Okino also pointed out that if owner-occupants with renters on their property were to see an increase in taxes, that increase would likely be passed on to the renters.
The discussion included a suggestion by one tax expert to do away with the homeowner's exemption.
"We need to accept at this time that given the past three or four months of your budget deliberations and the outlook for the next year, that a property increase probably is inevitable for next year," Tax Foundation of Hawaii President Lowell Kalapa testified. "Given that, I think we have to approach the whole property tax system with the idea of trying to reform it to make any tax increase palatable, fair and accountable."
Kalapa called the homeowner's exemption the "worst facet of smoke and mirrors" and said it is not a fair way of giving tax relief to people who need the help. Kalapa suggested the Council look at income levels as a criteria for giving tax breaks instead of granting relief just based on "people who own their shelter" or a homeowner's age.
About 132,000 properties have the homeowner's exemption.
Council Budget Chairwoman Ann Kobayashi said changes to the homeowner's exemption or the addition of a homeowner classification are ideas that the Council will move cautiously on because they are so drastic.
"Our goal is that we do not want to tax people out of their homes or business," Kobayashi said.
