Property tax hikes wrong way to rebuild Lahaina

by Joe Kent, Grassroot Institute

No one disputes that Maui is in need of revenue to fund the rebuilding of Lahaina.

But there is a right way and a wrong way to go about getting that money. Trying to wring it out of Maui property owners is the wrong way.

The good news is that the Maui County Council has actually eased up a little on some of the proposed tax rates compared with the original fiscal 2025 budget submitted by Mayor Richard Bissen.

For example, Bissen’s budget would have increased the rate on owner-occupied homes worth less than $1 million by 5.3%, but the Council flipped that script and made it a 5.3% decrease.

Bissen’s budget also would have increased the rate for homes valued between $1 million and $3 million by a shocking 25%, but again, the Council thought differently and decided that rate should stay flat.

The rates for almost all other housing properties, however, still would be higher, which is an astonishing burden to put on Maui property owners who are already struggling to deal with inflation, a stagnant economy and West Maui recovery efforts.

Under the current budget proposal, homes valued at more than $3 million would still see a rate increase of 18.2%. The rates on non-owner occupied homes would increase by between 0.3% and 12%. And the rates for transient vacation rentals would go up by between 5.5% and 26.5%.

The rates on commercialized residential properties–a legal term for bed and breakfast operations–also could face a number of changes.

For B&B properties valued up to $1 million, the rate would go down by 9%. But for those worth more than $1 million and up to $3 million, the rate would increase by 13.6%, and for B&Bs worth $3 million or more, by 82%.

Meanwhile, due to Maui’s continuing shortage of housing, home values on the island continue to increase. This year alone, the price of a single-family home on Maui has increased by about 10%, and condominiums by about 60%. And since property tax bills are based on both tax rates and home values, higher property tax rates would comprise a double whammy.

Ultimately, the question is whether Maui County property tax increases are needed at all.

One justification for higher rates is that the county has earmarked $140 million for emergency-management programs. However, the county’s share of that total is only about $26.5 million. The rest has already been secured through grants.

In addition, the county in fiscal 2025 is expected to take in $45 million from its new surcharge to the state general excise tax, plus receive a $260 million increase in grant funds.

Perhaps more important is whether any additional money raised through the proposed higher taxes would be money well spent.

Maui Councilmember Tom Cook at the April 16 budget meeting spoke about the county’s Office of Recovery being a barrier to private and nonprofit emergency home building.

“There are projects like Family Life Center [and] the Ohana Hope Village … that … I’ve been advocating and trying to help with it,” he said, “[and] the general feeling is that the County has been obstructive and not helpful.”

Councilmember Tamara Paltin at that same meeting echoed Cook’s concern.

“We’re running into some snags,” she said. “There’s no housing, no water. I mean, if we’re gonna follow the regular process, then I don’t know. Nothing’s gonna get built like how regularly nothing gets built, I guess.”

Considering such comments, why even propose property tax increases if the money is going to fund an office that has prevented emergency housing from being built?

Moreover, if more funds are necessary, why has there been so little effort to cut spending anywhere in the budget?

At the state level, legislators have talked about spending cuts to help fund the rebuilding of Lahaina. But the mayor’s proposed budget includes only two minor line-item department cuts totaling less than $5 million, while nearly every other department is seeking an increase in spending next year.

Yes, Maui faces a challenging year, but the people of Maui need a break from the taxes that make our state so expensive. Any benefit Maui County could receive from a property tax increase would be outweighed by the damage it would do to Maui residents.

A far better approach would be for Maui’s Council members to go back to the drawing board for the 2025 budget and look for ways to cut taxes and help the local economy grow.