Clearing air on budget and real property taxes


POSTED: Friday, June 19, 2009

I must set the record straight regarding the confusion caused by the city administration and your editorial on the budget and real property tax rates (”;Restore home tax credit,”; Star-Bulletin, June 14).

According to your editorial, Mayor Mufi Hannemann has said that the proposal touted by his administration would result in a savings of $106 for a homeowner of a home assessed at $600,000 this tax year. While I concur that the administration-supported proposal would result in a savings this year, and this year only, for the above-mentioned homeowner, the savings amounts to roughly $60. The administration's figures, in regards to the tax liability of a home assessed at $600,000, are quite faulty to say the least.

The administration also neglects to tell us that its proposal of $3.59 per $1,000 of assessed property value, which is 17 cents higher than the City Council's $3.42 proposal, will bring in $22 million in excess revenue for the city by directly overtaxing our homeowners. After overtaxing us, the administration supports returning $150 to each homeowner, which will cost the city $21 million. The net result of returning $21 million of a $22 million revenue gain is a windfall of $1 million in the city's favor, which amounts to a hidden tax increase on Honolulu homeowners.

It is absolutely unconscionable that the administration, and your paper, can support creating a false surplus by inflating real property tax rates, and then turn around and refund part of the so-called surplus while keeping a $1 million windfall. The city administration, and your editorial, failed to point out these facts to your readers.

Furthermore, the administration implies that the tax credit is an annual offering. This is simply not true. The credit is a one-time deal, which means it may not exist next year. The result of the administration's $3.59 rate without a tax credit amounts to the above-mentioned homeowner receiving a tax increase of $89 next year — the tax liability next year is $1,867 at $3.59 versus $1,778 at $3.42. These numbers are arrived at by taking a $600,000 home and applying the standard $80,000 homeowners' exemption; this leaves the homeowner with a net tax liability of $520,000. Multiplying 520 by $3.59 gives you a figure of $1,867 while multiplying 520 by the Council's $3.42 gives you a figure of $1,778, which is nearly an $89 difference.

The administration also fails to take into account that the value of one's home has no direct relation to one's wealth or ability to pay higher property taxes. A single professional making a $120,000 salary living in a $250,000 condo is much more able to afford a higher property tax rate than is a retiree living on a pension and Social Security in a $750,000 Kaneohe home she and her now-deceased husband purchased in 1960 for $40,000.

The best way to assist those with the least ability to pay is by keeping property tax rates down, or by increasing the current $50,000 annual income threshold of the low-income tax credit that caps low income homeowners' property taxes at four percent of their income.

It's my sincere hope that the administration will work more closely with the Council in the future. After all, we must all share the same goal of working toward the best product for the people of Honolulu. Relying on fuzzy mathematical figures and bashing others does nothing to advance this goal.


Ikaika Anderson is the floor leader of the Honolulu City Council, and represents Windward Oahu. He wrote this piece for the Star-Bulletin.