Lingle signs
land tax
into law

Based on the current market,
more than half of homes sold
on Oahu are affected

Gov. Linda Lingle ignored the advice of some fellow Republicans yesterday by signing a bill into law that will increase the tax on some property transactions and is expected to generate $19 million for affordable-housing projects and land preservation efforts.

$600,000 is threshold for tax increase A bill signed yesterday by Gov. Linda Lingle increases the conveyance tax paid by sellers on property transactions over $600,000. Under the new law, the tax remains at 10 cents per $100 for properties less than $600,000. The tax increases to 20 cents per $100 for conveyances exceeding $600,000 and to 30 cents for those costing more than $1 million. Residential properties unoccupied by owners would go to 15 cents, 25 cents and 35 cents per $100, respectively. According to state figures, the largest transaction in 2004 was $716.7 million. Under the new law, that transaction would have generated $2.5 million in conveyance taxes. Sources: Hawaii State Legislature, Office of the Governor

Lingle, who campaigned on a pledge to reduce taxes, said the decision to sign the bill "wasn't even a close call" because she felt it addressed a critical need for affordable housing in Hawaii.

"Sometimes you can't do what's politically expedient for you that allows you to stand up and say, 'I did the letter of what I said,'" Lingle said. "Our state was in a crisis for affordable housing. I did what was right for all the people in the state, and I put it above my political career."

House Bill 1308 increases the conveyance tax that sellers pay on property transactions of more than $600,000. Currently, the median home sale price on Oahu is more than $600,000. The higher tax is expected to generate $35 million a year.

Of that money, 10 percent would go to a special fund to purchase land for conservation, while the amount going to the Rental Housing Trust Fund would be increased to 30 percent from 25 percent. Twenty-five percent is set aside for watershed protection, and the remainder goes to the general fund.

Lingle called the 35 percent going to the general fund "the one part of the bill I don't care for."

Among those who lobbied Lingle to veto the bill was Senate Minority Leader Fred Hemmings, who said he and the governor "agreed to disagree" on the measure.

"It's a classic liberal Democrat ploy to say one thing and do another," said Hemmings (R, Lanikai-Waimanalo). "It ostensibly is hiding behind preserving legacy land for future generations, but what it really is is a massive tax increase. ... It's a feel-good bill that is going to cost the taxpayers dearly."

Lingle's approval was welcome news to Democratic legislators, who had been preparing for a veto of the conveyance tax increase.

A memo yesterday from Senate Ways and Means Chairman Brian Taniguchi to colleagues listed HB 1308 as one of 23 measures "having a high probability of being vetoed."

"It is a tax increase -- it's not something we expected our Republican governor to do," said Rep. Brian Schatz (D, Tantalus-Makiki), who co-introduced the bill in the House. "This is the right tax for the right set of reasons and something that I think we can all support as a community."

Based on 2004 figures, only 7.4 percent of transactions would be affected by the tax increase, Lingle said.

However, median home prices on Oahu alone have increased $115,000 since the end of last year, topping out above $600,000.

Last month, half of the 366 single-family homes sold on Oahu went for more than $610,000, an increase of 37 percent from the previous year, according to the Honolulu Board of Realtors. The median price jumped nearly 12 percent from April.

On Maui the median sale price of single-family homes reached a record $780,000 last month.

Lingle said she recognized Hawaii's skyrocketing housing costs but that she felt the benefits of the bill outweighed the negative aspects.

"There's always a balancing that's going on," Lingle said. "On balance, I feel this is a very good bill."

To offset the higher taxes, Lingle said she would push for tax cuts amounting to 10 times what the new law will put into the general fund.