Institute urges Kauai Council to OK retroactive property tax credit

from Grassroot Institute

The following testimony was presented February 16, 2023, by the Grassroot Institute of Hawaii to the County of Kauai.
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February 16, 2023
11:30 a.m.
Kauai County Council Chambers
To: Kauai County Finance & Economic Development Committee
      Councilmember Luke Evslin, Chair
      Councilmember Addison Bulosan, Vice Chair

From: Grassroot Institute of Hawaii
           Jonathan Helton, Policy Researcher

RE:  Bill 2891 — RELATING TO THE REAL PROPERTY TAX

Comments Only

Dear Chair and Committee Members:

The Grassroot Institute of Hawaii would like to offer its comments on Bill 2891, which would create a one-time tax credit for owners of houses on Kauai in the Residential Investor class that were either used as long-term rentals or could have been classified as owner-occupied in the 2022 and/or 2023 tax years.

This is a good bill that seeks to provide relief to property owners who should have received tax relief in the past but did not file for it.

In the 2022-2023 tax year, Residential Investor properties faced a 0.094% tax rate, while Residential properties — a class that includes long-term rentals — faced a 0.0605% tax rate. Homestead properties were taxed at only 0.00305%.[1]

For a $1.5 million house, the tax difference between Residential Investor and Residential is about $5,000, while the difference between Residential Investor and Homestead is about $10,000. Thus, the proposed tax credit could be critical for some property owners who might otherwise have to increase the rents of their tenants, forgo basic necessities or even sell their properties.

Kauai has some of the state’s most generous property tax relief mechanisms. Its homeowner exemption, very low income tax credit, assessment cap and home-preservation program offer relief to homeowners who also live in their homes.

The Kauai County Council should be commended for these programs, but also should seek to expand relief as housing prices — and thus property tax assessments — continue to [increase].[2]

No one should be forced to sell their home simply because they cannot afford to pay their property tax bill, and far too many homeowners are “land rich, cash poor.”

As the Council prepares its fiscal 2024 budget, it should consider the simplest tax relief of all — a rate cut.

As we explain in a forthcoming report on property tax relief, reducing the tax rate on owner-occupied homes, businesses and rental properties would provide instant benefits while letting property owners avoid the headaches and paperwork associated with applying for tax credits and exemptions.

Bill 2891 does not provide relief across the board, but it would provide relief to homeowners who live in their homes and long-term rental owners whose oversights left them subject to a higher tax rate.

Thank you for the opportunity to testify.

Sincerely,

Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii
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[1] “Real Property Tax Rates for Tax Year July 1, 2022 to June 30, 2023,” Technical Branch, Real Property Assessment Division, Department of Budget and Fiscal Services, City and County of Honolulu, August 2022.

[2] Wyatt Haupt, Jr., “Median home price hits $1.6M in December 2022,” The Garden Island, Feb. 6, 2023.