Bill 48 (2023): Kupuna, retirees should retain property tax relief when they move

from Grassroot Institute of Hawaii, September 6, 2023

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Honolulu City and County Council on Sept. 6, 2023.
_____________

September 6, 2023
10 a.m.
Honolulu City Council Chambers

To: Honolulu City and County Council
      Councilmember Tommy Waters, Chair
      Councilmember Esther Kiaʻāina, Vice Chair

From: Grassroot Institute of Hawaii
           Ted Kefalas, Director of Strategic Campaigns

RE: Bill 48 (2023) — RELATING TO REAL PROPERTY TAXATION

Comments Only

Dear Chair and Councilmembers:

The Grassroot Institute of Hawaii would like to offer its comments on Bill 48 (2023), which would create an assessment cap for Honolulu homeowners who are 65 or older.

This cap would ensure the assessed value of any eligible property could increase by no more than 2% each year or the rate of inflation, whichever is lower.

The bill provides that whenever a home is sold, its value is reset to the market value. It also specifies that if a homeowner improves the property through renovations or additions, the value of those improvements are to be added to the assessed value of the home.

The Institute supports the intent of this measure, which aims to protect retirees and kupuna from sudden increases in their tax bills; however, we believe the bill should be amended to mitigate possible drawbacks.

Research demonstrates that assessment caps — think California’s Proposition 13 — can distort the housing market by encouraging residents to stay in one home in order to keep their tax benefit. This is especially true of assessment caps set to low levels such as the 2% limit in Prop 13 and as proposed in this bill.[1]

Many retirees may want to downsize to a smaller home, but do not want to see their tax bill go sky-high. To mitigate this concern, California has approved several ballot measures guaranteeing that older residents who change houses can do so without losing their tax benefit.[2]

The Council should add similar language to this bill, ensuring that kupuna who choose to move or downsize will not see their property tax protections removed.

In addition, the Council should consider whether there are other ways to accomplish Bill 48’s goal. A substantial increase in the homeowner exemption for those 65 and older could achieve the same end.

Likewise, the county could also partner with the state Department of Taxation to determine the income of Honolulu homeowners, automatically enrolling eligible homeowners in the county’s “circuit breaker” program, which caps the total tax that lower income homeowners can pay.

We look forward to dialogue on this issue.

Thank you for the opportunity to submit our comments.

Sincerely,

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] Nada Wasi and Michelle White, “Property Tax Limitations and Mobility: The Lock-In Effect of California’s Proposition 13,” National Bureau of Economic Research Working Paper 11108, February 2005. See also Keith Ihlanfeldt, “Do Caps on Increases in Assessed Values Create a Lock-In Effect? Evidence From Florida’s Amendment One,” National Tax Journal, March 2011.
[2] See “Transfer of Base Year Value for Persons Age 55 and Over – Propositions 60/90,” California State Board of Equalization, accessed Sept. 1, 2023.

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Bill 59: Provide older homeowners with increased tax exemption

from Grassroot Institute of Hawaii, September 6, 2023

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Hawaii County Council on Sept. 6, 2023.
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September 6, 2023 9 a.m.
Hawaii County Building

To: Hawaii County Council
      Councilmember Heather Kimball, Chair
      Councilmember Holeka Goro Inaba, Vice Chair

From: Grassroot Institute of Hawaii
           Jonathan Helton, Policy Researcher

RE:  Bill 59 — RELATING TO HOME EXEMPTIONS

Comments Only

Dear Councilmembers:

The Grassroot Institute of Hawaii would like to offer its comments on Bill 59, which would create a $125,000 home exemption for Hawaii Island owner-occupants 80 years old and older.

Currently, all Hawaii Island homeowners 75 or older can receive a $110,000 home exemption. Bill 59 would retain that exemption for homeowners between 75 and 79, while creating a new exemption amount for those 80 and older.

With the existing $110,000 exemption, for example, an 80-year-old homeowner with a house valued at $300,000 would pay — at the current rate of $6.15 per $1,0000 of assessed value[1] — a tax bill of $1,168.50. Under Bill 59, the same individual would pay a tax bill of $1,076.25 — a difference of $92.25.

The county’s Department of Finance estimates that 5,316 homeowners would qualify for this new exemption amount, and that each homeowner would save an average of $74. In total, the new exemption value would save older Hawaii Island homeowners almost $400,000.[2]

Retirees on fixed incomes would certainly benefit from this tax relief. Right now, any increase in their assessments could create a tax bill that would eat into their small monthly incomes.

With the cost of food, transportation and electricity as high as ever, any savings for older homeowners and retirees would be a good thing.

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, 2023 to June 30, 2024,” Real Property Assessment Division, Department of Budget and Fiscal Services, City and County of Honolulu, July 2023.
[2] Michael Brestovansky, “County council proposes larger property tax break for older kupuna,” Hawaii Tribune-Herald, Aug. 1, 2023.

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Kauai looks to simplify tax relief, increase homeowner exemption, add assessment cap

from Grassroot Institute of Hawaii, September 6, 2023

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Kauai County Council on Sept. 6, 2023.
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September 6, 2023 8:30 a.m.
Kauai County Council Chambers

To: Kaua‘i County Council
      Councilmember Mel Rapozo, Chair
      Councilmember KipuKai Kuali‘i, Vice Chair

From: Grassroot Institute of Hawaii
           Jonathan Helton, Policy Researcher

RE: Bill 2901 — RELATING TO REAL PROPERTY TAX

Comments Only

Dear Chair and Councilmembers:

The Grassroot Institute of Hawaii would like to offer its comments on Bill 2901, which would increase the homeowner exemption by $20,000, repeal miscellaneous property tax exemptions and implement a 20% assessment cap for all classes of property not covered by the existing 3% assessment cap.

The Institute is supportive of increasing the homeowner exemption. Such exemptions offer tax relief targeted at owner-occupants. Increasing the exemption by $20,000 across the board — from $160,000 to $180,000 for homeowners younger than 60, for example — will assist local families in paying their yearly tax, utility, food, housing and transportation bills.

At the current rate of $2.59 per $1,000, all homeowners will save $51.85 per year from the additional $20,000 in exempt value. Kauai homeowners would save about $618,000 in total.

Though this amount may not seem like much, people living on fixed incomes or who make much less than the area median income will certainly benefit from the extra $50 a year.

Likewise, we believe the repeal of various exemptions will simplify Kauai’s tax code. As the Tax Foundation of Hawaii has written, “Complicated tax rules make compliance more difficult and costly for both taxpayers and the government.”[1]

Such little-used exemptions include for individuals affected with leprosy, property used in manufacture of pulp and paper, air pollution control facilities, fixtures used in manufacturing or producing tangible personal products and the automatic fire-suppression system.

Finally, the proposed new assessment cap will limit abnormally large assessment increases. Under the new cap, all properties other than those homeowner and residential properties that already receive the 3% assessment cap will see their assessed value increase by no more than 20% each year.

Given the hot real estate market of the past three years, this 20% cap will assist taxpayers whose properties increase in value by more than 20% year-over-year, thereby lowering their tax liability.

Low assessment caps, such as the county’s existing 3% cap for owner-occupied properties or California’s 2% cap under Proposition 13, have been shown to distort housing purchases.[2] However, the proposed 20% cap is high enough that it should not distort Kauai’s real estate market in any substantial manner.

At the last hearing, there was some concern that this 20% cap could disproportionately benefit owners of high-value agriculture or tourism-related properties. This concern could be addressed if the cap were limited to the owner-occupied mixed use, commercial and industrial classes.

Taken as a whole, the three major changes this bill makes would simplify Kauai’s tax code and offer tax relief to all island taxpayers.

Thank you for this opportunity to testify.

Sincerely,

Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii
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[1] Tax Foundation of Hawaii, “Guiding Principles,” accessed Aug. 4, 2023.
[2] Nada Wasi and Michelle White, “Property Tax Limitations and Mobility: The Lock-In Effect of California’s Proposition 13,” National Bureau of Economic Research Working Paper 11108, February 2005. See also Keith Ihlanfeldt, “Do Caps on Increases in Assessed Values Create a Lock-In Effect? Evidence From Florida’s Amendment One,” National Tax Journal, March, 2011.