Tax cut proposal needs more work
City Council leaders have proposed ways to reduce property taxes as valuations have increased sharply.
COMPLAINTS from Oahu homeowners about skyrocketing property valuations -- and the anticipated increases in their taxes that accompany the higher assessments -- have been loud enough for the City Council to hear.
In proposing bills intended to lessen tax burdens and calling on Mayor Hannemann to submit a budget reflecting lower tax collections, Council members are at least acknowledging the sticker shock that has overwhelmed homeowners since receiving assessment notices earlier this month.
Though Hannemann has said reducing property tax rates is not an option -- as did Council leaders -- taxpayers' outrage could persuade him to change his mind.
However, proposals by Council Chairman Donovan Dela Cruz and budget chief Ann Kobayashi might produce a snarl of credits and reduction qualifications that could complicate tax calculations.
The city might do better by changing the way it figures valuations, which are at the heart of the problem. Home sales in a booming real estate market like Hawaii's jack up the worth of similar property since property values are calculated on recent pricing. Homeowners have seen valuations jump sharply with this year's assessments rising a startling 26 percent on top of a similar increase last year.
The Council sets the rates at which properties are taxed each spring, theoretically based on the city's budget. This places the mayor and the Council in an unenviable position. They must balance residents' desires for services with their reluctance to give over more of their paychecks to the government.
Dela Cruz and Kobayashi hope to buffer the burden by proposing income levels to cap taxes and allot credits, and to provide exemptions if owners promise they won't sell their homes for 10 years.
What they also haven't tallied yet is the affect on revenues their plans would cause and how to prevent fraudulent claims that might result. Moreover, they must still reckon any revenue losses with the increasing costs of running the city.
The Council appears to be responding to taxpayers, but has handed off to the mayor a prickly problem in shaping his budget.
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