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Council to
consider property tax
‘circuit breaker’

The measure would help
lower-income families cope
with property taxes

By Gordon Y.K. Pang
Star-Bulletin

Lower-income families who are homeowners may be able to get more relief from property taxes under a bill introduced at the City Council.

The bill would allow more people to qualify for the "circuit breaker" program, which limits property taxes for those below a certain income level.

The bill is expected to get its first airing at Wednesday's Council meeting.

The new program would:

Allow homeowners having a household adjusted gross income below 80 percent of Honolulu's median income to qualify for the circuit breaker. Currently, only those 55 and older may qualify. The current median area family income is $60,900, meaning the qualifying income would be $48,720.

Cap the amount of taxes due at no more than 3 percent of the household's adjusted gross income through a tax credit. Currently, that limit is at 5 percent, and there is a $500 maximum on the tax credit.

Require the property owner to choose between paying real property taxes under the circuit-breaker approach or under the number of other exemptions he is entitled to.

Change the benefit from a tax refund to a credit.

Council Budget Chairwoman Rene Mansho said the measure would allow for more families on fixed or little income to be able to cope with property taxes. "This benefits the land-rich and the cash-poor," Mansho said.

Lowell Kalapa, executive director of the Tax Research Foundation of Hawaii, agreed. "This truly helps those who are poor and cannot afford to pay their tax bills," Kalapa said.

Rather than base the amount of taxes paid on "the artificial assumption" that families who own homes have a good income stream, he said, "it's based on the amount of available income to pay the tax bill."

Mansho said the program may not be beneficial for all families.

Qualifying homeowners, particularly those who are older, may choose not to participate in the circuit-breaker program and instead keep taking existing exemptions that are applied to the valuation of properties.

Such exemptions increase, from $40,000 per property to up to $120,000, as the homeowner ages.

Councilman Duke Bainum, who headed a task force that explored property tax issues last year, said he likes the concept of an expanded circuit breaker but worries about its implementation.

"Right now, it's too restrictive," Bainum said.

But task force members favored a more "phased-in" approach that would gradually expand the eligible pool of homeowners, he said. That would allow the city more time to deal with the impact on its finances and personnel.

City spokeswoman Carol Costa said that under the existing program, 125 seniors took advantage of the circuit breaker during the past year.

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City & County of Honolulu