Cost of property tax breaks pondered
Increasing the amount owner-occupants can subtract while calculating their real property taxes could cost the city $20 million in tax revenue.
And that leaves City Council Budget Chairman Todd Apo wondering how much of a homeowner exemption might be too much.
"Changes to the exemption (are) something that we're obviously going to continue to look at, (but) I'm not convinced that we need to do major revisions to the exemption," Apo said after a special Budget Committee meeting yesterday that looked at 11 property tax proposals to offset rising property values.
At Apo's recommendation, the committee discussed and took testimony on the proposals but will await Mayor Mufi Hannemann's budget before making decisions. Hannemann must submit a budget by Thursday.
Besides a higher homeowner exemption, Apo said the Council's package of property tax breaks for owner-occupants will likely include reducing the tax rate, a one-time tax rebate and further help for property owners with low incomes.
"We're not going to be able to do away with property taxes, but to the extent that it is more than some ... can afford, we're going to make sure that we don't tax people out of their houses," Apo said.
Real Property Assessment Administrator Gary Kurokawa said that when the homeowner's exemption was raised last year to $80,000, the fiscal impact to the city was $9 million to $10 million. But if the exemption goes up again to $120,000, the city would lose $20 million in revenue, he said.
Apo said, "A $20 million impact to the budget is something that we would need to find ways to cut. And if you get into a number that is that big, do you do that through exemptions, or do you broadly try to spread out that tax relief?"
Councilman Charles Djou, who introduced Bill 12, which raises the exemption to $120,000, said with a chuckle that he "had the opposite reaction. My reaction was, 'It's only $20 million? I should've gone a little higher.'"
"Taxes are too high, and they've been too high for too long, and they need to come down and they need to come dramatically," Djou said.
But Lowell Kalapa, president of the Tax Foundation of Hawaii, and others said exemptions are not the way to cut taxes -- reducing the rate is.
"It doesn't really solve the problem of rising assessments," Kalapa told the committee. "It doesn't really provide tax relief."
John and Lucinda Pyles of Kahala said in written testimony that Bill 12 would only reduce their assessment by less than 2 percent after a 25 percent increase in the value of their home during the past five years.
"This is not going to help," they wrote. "We believe an annual cap (on assessments) is necessary ... as well as exemptions for local residents and for seniors."