The Legislature’s proposed constitutional amendment allowing the state to collect property taxes to increase money for education is poorly construed and needs more work.
Education is a motherhood issue and the measure, which faces a final vote in the Senate this week after earlier getting wide support from both houses, would stand a strong chance of winning voter approval in November.
But its vague language doesn’t guarantee all funds would go to education, lawmakers fail to weigh other priorities for limited tax dollars, and they constrain the counties’ ability to use the property tax — their main funding source — for their own needs.
The amendment was pushed by the Hawaii State Teachers Association, which originally sought to fund it through the state’s excise or hotel room tax.
It didn’t gain traction until lawmakers glommed onto the idea using the property tax, enabling them to win favor with the powerful teachers union while putting the fiscal pain on the counties.
The union’s main interest is raising money for bigger teacher pay raises. Pressing issues for the kids, such as dilapidated facilities, wouldn’t necessarily receive priority for new funding.
The proposed amendment doesn’t say how much would be raised, which properties would be taxed or exactly how the funds would be used.
It would simply allow a future Legislature to enact “a surcharge on investment real property to be used to support public education.”
While lawmakers say the tax is aimed at outside investors, the language doesn’t guarantee local homeowners or renters wouldn’t end up bearing the weight. Nor does it guarantee legislators wouldn’t use the new money as a cover to reduce existing general funds for education.
This tax hasn’t been discussed in the context of overall state and county needs.
Each dollar it siphons from a limited tax base is a dollar unavailable for homelessness, public worker pension and health care deficits, and infrastructure threatened by decay and rising sea levels — all of which will take billions to solve.
The property tax until now has been a constitutionally protected county tax, vital to local government services, and opening it to the state’s sticky fingers creates uncertainties that could hamstring county finances.
For instance, state taxation of investment properties would preclude Honolulu from tapping those revenues to pay hundreds of millions in rail operating costs, potentially putting the burden for rail operations on local owner-occupants.
The rail fiasco illustrates why playing shell games with taxes is bad policy: If the city had to fund rail construction from property taxes it’s accountable for instead of the state’s excise tax, money would have been spent more carefully — if at all.
If legislators want more money for education, a state function, get it from a state tax they’re accountable for — excise, income or hotel — instead of raiding a county tax.
Reach David Shapiro at volcanicash@gmail.com.
