City should avoid radical tax breaks


POSTED: Friday, October 30, 2009

Unlike the state, which relies largely on fixed income tax rates for its revenue, the counties depend on flexible property tax rates and routinely adjust them to achieve balanced budgets. The City Council should avoid any radical departure from that method during the current economic crisis.

Whether Mayor Mufi Hannemann's proposal that the city be allowed to give a special tax break to homeowner-occupants fits that description is debatable. The administration suggests that such a tax break would be mild and might not even be necessary, while opponents say it would gouge nonowners, who would pass on their tax increases to renters.

Homeowner-occupants already receive a sizable break on property taxes — an exemption of $80,000 and, for seniors, $120,000 from their taxable property values. That amounts to a yearly reduction of taxes on a median-priced home by nearly $270 for owner-occupants, more than $400 for seniors. Those reduction rates seemingly can be changed to produce the same effect sought by the city administration.

Hannemann met with Council Chairman Todd Apo, who had opposed a separate tax category for owner-occupants.

“;He wanted to explain to me face to face how important this was and that it was enabling legislation, not implementing legislation,”; said Apo, who ended up being the swing vote in the 5-3 vote approving it.

The measure keeps the issue alive for further property tax rate review when the city budget process occurs in March.

Those voting against the measure accused Hannemann of manipulating the Council.

“;I hope it has got nothing to do with a compromise on the landfill or the rail,”; grimaced Councilman Romy Cachola, referring to the 20-mile rail transit project. “;I know there are things behind this.”;

Apo said he and the mayor discussed only the tax issue — “;no landfill, no transit, nothing else.”; If Cachola has evidence of a quid pro quo, he should say so. (Two years ago, Cachola told Hannemann he would vote for the rail if it were to run through his Salt Lake district. He did so but said there had been “;no deal”; with the mayor. Salt Lake later was abandoned, the rail plan has been rerouted to Honolulu Airport and Cachola has fought against it.)

As for property taxes, Councilman Charles Djou said, “;Protecting homeowners so we can stick it to everyone else doesn't make any sense.”; His valid concern is that landlords would pass on the extra tax cost to their renters.

The administration cites two mainland studies suggesting otherwise. It also has worked on state legislation that would create a tax credit for renters to offset any rental hikes attributed to landlord tax increases — essentially passing the baton.

The City Council should concentrate on the issue at hand rather than engage in heated exchanges that include unfounded accusations. Hannemann's proposal, while questionable, should not be killed for the wrong reasons.