Only investment homes valued at $2 million or more would be subject to a property tax surcharge earmarked for public schools under revisions legislators made Tuesday to a controversial tax proposal drafted by the teachers union.

The Hawaii State Teachers Association put forward a pair of bills that it said could raise an estimated $500 million a year for the Department of Education by creating a property tax surcharge for owners of residential investment properties and a daily surcharge on visitor accommodations.

Senate Bill 683 calls for a constitutional amendment that, if approved by voters, would allow the state to collect the property tax surcharge. An amendment is needed because the state Constitution gives counties the power to levy property taxes. Senate Bill 686, meanwhile, contains the proposed tax rates and exemptions for the surcharges, along with language about how the collected funds could be spent.

Earlier versions of the bill called for five tax rates based on a home’s value, starting with investment properties with assessed values of $500,000 or less, up to homes valued at $2 million or more. It would apply to residential investment properties — homes or condominiums that do not serve as the owner’s primary residence.

At a joint Senate Ways and Means and Judiciary and Labor hearing Tuesday, the committee chairmen amended Senate Bill 686 to eliminate the four lower tax rates, making the surcharge applicable only to investment homes valued at $2 million and above at a rate of $7.50 for every $1,000 of assessed value. At that rate an investment home valued at $2 million would incur a $15,000 annual surcharge.

It’s unclear what the financial impact of the change would be, but the HSTA had estimated that the property tax surcharge would bring in $350 million of the projected $500 million that both taxes would generate. There are approximately 2,000 homes on Oahu that are valued at $2 million or more this fiscal year that do not receive a homeowner’s exemption for owner-occupants, according to a city spokesman.

Corey Rosenlee, president of the teachers union, said the revised threshold would “dramatically” reduce the bill’s reach. He noted that the bill already includes more than a dozen exemptions for investment properties, including affordable housing that’s rented for less than $1,500 a month and properties rented to low-income seniors or disabled veterans. The Senate Education Committee, which previously heard the bill, added in another exemption: Residents would be able to exempt one investment property.

Rosenlee said he’s concerned that the increased threshold will let nonresidents buying up million-dollar luxury condominiums off the hook.

“The hard part that we’ve been trying to get across is that not only would this fund education, but if there’s no disincentive for speculators, it’s going to drive up the cost of living for everyone,” Rosenlee said after Tuesday’s hearing. “Our research shows … 70 percent of all town­homes on Maui and Kauai are owned by nonresidents, and about 25 to 33 percent of homes in Hawaii are not owned by Hawaii residents.”

Sen. Jill Tokuda, chairwoman of the Ways and Means Committee, said the increased tax threshold is intended to ensure local families with more than one home aren’t burdened by the proposed tax. She said oftentimes children will inherit their family homes when their parents die, downsize or move into senior living facilities.

“But the value of their (second) home might be very high because of the neighborhood,” she said. “That is really hard on many of our families who have worked hard to be able to buy their homes to begin with. It’s very hard for them to hold on to these homes.”

Tokuda and Sen. Gil Keith-Agaran, chairman of the Judiciary and Labor Committee, said despite real concerns about the tax negatively affecting residents and county governments that rely on property tax income, they moved the measure forward to keep the dialogue going.

“I think both the House and Senate are moving these measures forward because the discussion on adequately funding education is important, and I think both bodies feel like we need to continue the discussion,” Keith-Agaran said after the hearing.

Tokuda added, “While it is one pot of money that teachers are looking at, the difficult decision for lawmakers is we have to look at how everything is impacted. It is about the bigger picture. It is about the overall burden it places on families and how we have to at some point be able to provide as much as we can for all of the various priorities and public needs without overtaxing and without taking from other government services.”

If the measures pass a Senate floor vote, the bills would then cross over to the House for consideration.