Wednesday, April 01, 2020
Hawai'i Free Press

Current Articles | Archives

Sunday, June 23, 2013
Needed Services Should be Paid by Users of the Service
By Lowell L Kalapa @ 6:00 AM :: 3542 Views :: Tax Credits, Taxes

Needed Services Should be Paid by Users of the Service

by Lowell L. Kalapa, Tax Foundation of Hawaii

The reaction to last week’s commentary could only be described as shrill.

Readers could not believe that one would question the sacrosanct exemptions for nonprofits, like charities and schools, provided under the real property tax. Many of these exemptions were adopted by the legislature when the real property tax was administered by first the Territory of Hawaii and later the State of Hawaii. No doubt, many of these exemptions emulated treatment extended under the net income tax law which recognizes the nonprofit nature of these organizations.

While the income tax exemption for such organizations recognizes that income received by the organization is used to further its exempt activity or cause, such is not the case for the real property tax. Some may argue that an exemption from the real property tax allows a nonprofit organization to avoid the cost of the tax and, therefore, be able to redirect what resources they have toward the organization’s exempt activities. But one has to remember that the net income tax, as well as the state’s general excise tax, is collected so that the state can provide services that are not necessarily of benefit to a charity or a nonprofit organization.

However, real property tax collections pay for some very basic services, like police and fire protection, sanitation and recreation. All of these services are critical to the health and safety of our community. Thus, unlike education and schools, social services and prisons, all citizens utilize the services provided by the real property tax at one time or another including nonprofit organizations. If there is a grease fire in the school cafeteria, the local fire department is called. If someone breaks into the parish hall and steals the offering box, the local police department is called. A child falls out of a tree at a local scout camp and the emergency medical services team is called to transport the injured child to the local clinic or hospital.

The same can be said of those on Hawaiian Homes’ lands or who are residents of Kuleana lands that are exempt from the real property tax. In the case of credit unions, it should be noted that while the federal law which established federally chartered credit unions exempt those financial institutions from the net income and sales taxes on their purchases, the federal law is silent on exempting credit unions from the real property tax. Hawaii is one of the few jurisdictions which grants credit unions an exemption from the real property tax. This is because the various county councils were lobbied to adopt such an exemption.

So, should all of these entities be subject to the real property tax like other land owners? While there may be some substance to the fact that many of these organizations do provide services that would otherwise have to be delivered by state or county governments, they are still beneficiaries of the critical services that county governments provide. So perhaps they should be given a break of some kind in recognition of the services that they provide. On the other hand, as we all know often when something is offered for free, the beneficiaries take those services for granted and demand even more. Thus, placing a price on these services insures accountability as opposed to entitlement.

One alternative already exists. That is the exemption for nonresidential or commercial historic structures. Commercial historic properties that are dedicated for historic preservation are granted an exemption equal to 50% of assessment and, therefore, results in a reduction in what their tax bill would have been. A similar discount might be considered for all nonprofit property which is currently exempt. So, for example, the assessment ratio for all nonprofit institutions could be set at 10% or 20% of the fair market value times the appropriate rate for the category of property. For those nonprofit organizations that have relatively little real property, they will probably see little change from the minimum tax that they now pay while those organizations that utilize large areas of real property will see an increase over and above the minimum tax. So the offices of a small nonprofit will see little increase in their real property tax burden while a school sitting on acres of prime property will see a larger increase; however, they all will pay a property tax bill that is substantially less than what a for-profit business would pay.

As for residential exemptions such as for those who are elderly and disabled, or in the case of Kuleana lands, some counties already have the “circuit breaker” approach to tax relief which recognizes the homeowner’s ability or inability to pay. As we noted last week, age and disability are not valid indicators of an inability to pay.

- 30 -

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

ALEC

Alliance Defending Freedom

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust 

Build More Hawaiian Homes Working Group

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT