CORRECTION: An earlier version of this editorial erred in stating that Punahou School and ‘Iolani School pay differing city property taxes for their campus acreage. Like other nonprofit groups, the two schools pay equal amounts of $300, although Punahou’s 74-acre campus was assessed at $37,000 while ‘Iolani’s 22-acre parcel is valued at $105 million, according to city Budget Director Mike Hansen.
Also, the misinformation was wrongly linked to Holly Huber, a database specialist.
In addition, a homeowner who is at least 65 years old gets an additional tax exemption of $140 rather than $1,400, as stated in the editorial, and homeowners older than 75 receive exemptions less than that was stated.
State legislators and the Abercrombie administration experienced this year the wrath involved in shelving tax exemptions to help balance the budget, and the City Council should enter a similar arena carefully. A review panel’s move toward abolishing property tax exemptions in their entirety should be considered with skepticism.
Legislators in this year’s session voted to suspend nearly two dozen general excise tax exemptions to bring in $173 million, considering that to be preferable to raising the tax across the board. Likewise, the City Council would be smart to zero in on tax exemptions for those who need it least, focusing on apparent inequities, rather than raise property tax rates for all property owners.
For example, Holly Huber, a database specialist who has examined the system, shakes her head in observing Punahou School’s $37,000 property-tax assessment for its 74-acre campus, while ‘Iolani School was assessed $105 million for its 22-acre parcel.
But like other nonprofit groups with tax-exempt property, the two schools pay equal amounts of $300, according to city Budget Director Mike Hansen.
Huber told the Star-Advertiser’s Rob Perez, about the numerous errors or inaccuracies due to lack of oversight: “I can’t believe what a nightmare it is.”
Most of the city’s revenue comes from property owners, who pay a total of nearly $800 million in real property taxes. The rest comes from fuel taxes, user fees such as TheBus fare, monthly sewer fees and a share of the state’s hotel room tax.
Honolulu property tax exemptions are sizable, amounting to more than $100 million of would-be fees, and nearly half of that goes to homeowners. While each homeowner is allowed to subtract $80,000 from the home’s actual value to determine the taxable amount at $3.50 per $1,000 value, a homeowner who is at least 65 years old gets an additional exemption of $40,000, which amounts to $140 in tax exemptions per year. With each 10 years of age after that, the homeowner gets what can amount to an additional tax reduction of $70.
Retirees depending mainly or entirely on monthly Social Security payments as their income can be expected to respond as they did earlier this year when Gov. Neil Abercrombie called for subjecting pension income to state income taxes. The Legislature reacted by rejecting the proposal.
The City Council-formed Real Property Tax Advisory Commission is leaning toward recommending that the city abolish property tax exemptions in their entirety, including not only the elderly but the blind and disabled. It also leans toward proposing that the exemptions for charitable organizations, credit unions, schools, churches and other groups be eliminated or substantially reduced.
Lowell Kalapa, the commission’s chairman and head of the Tax Foundation of Hawaii, said the group was “created to take the political heat off elected officials” by presenting what is sure to draw emotional opposition, as it should.
Hawaii is recognized for its relatively low property tax rates, for good reason. Virtually all other jurisdictions in the country use property taxes as revenue for their schools systems, and that amounts to a lot. Hawaii relies on state income taxes to pay for public schools.
Overall, Hawaii’s taxes are high, and the commission’s sweeping recommendation would have the effect of increasing them drastically for middle-income families in today’s tough economy.
This tax advisory commission is to be lauded for taking a stern look at the mishmash of property tax exemptions — an overdue task — to take stock, and to ferret out inequities or obsolete exemptions that warrant elimination. But tread carefully: Flattening property taxes based on philosophy will likely have dire consequences on the practical. Five of the nine Council members are up for election next year and should know better than to sharply increase taxes by eliminating property tax exemptions across the board.
