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How counties can provide tax relief
By Grassroot Institute @ 10:31 PM :: 1725 Views :: Tax Credits, Taxes

Helton, Miro discuss ways counties can provide tax relief

from Grassroot Institute of Hawaii, March 27, 2023

County lawmakers haven’t decided yet how to deal with property tax hikes that are expected to result from higher property assessments across the state, but relief measures such as rate cuts, tax credits and homeowner exemption increases seem to be on the table.

Jonathan Helton, Grassroot Institute of Hawaii policy researcher, talked with H. Hawaii Media radio host Johnny Miro on Sunday about proposals from a forthcoming Institute report on ways each county could help homeowners already struggling with inflation and other rising costs of living.

Helton stressed the importance providing relief for renters and businesses as well, because there are currently no proposals to do so.

“A lot of people are hurting,” he said, “and I think that a lot of these county councils are recognizing that they might depend on the property tax for a lot of government services. But they also need to keep in mind that a lot of homeowners, a lot of business owners, a lot of renters, you know, they’re having to move from Hawaii to other states because of higher prices, higher taxes, so I think there is going to be some room for tax relief.”

Helton said the assessed value of residential properties on Oahu went up an average of 9% this year, and Mayor Rick Blangiardi has proposed a one-time tax credit of $300, via Bill14, which would apply to all homeowners. 

Also, the Honolulu City Council is considering a measure, Bill 38, that would boost eligibility for the low-income property tax credit, and another, Bill 40, that would increase the $100,000 homeowner exemption by $10,000 or possibly $20,000.

“We would be very supportive of both of those things,” Helton said. “They’re not as straightforward as a rate cut, but they do provide relief to homeowners nonetheless.”

Helton said Kauai’s proposed budget anticipates a 17% increase in property tax revenue due to assessment increases, but does feature a 10% rate cut for homestead and residential properties — though not for businesses or renters.

Maui and Hawaii counties, he said, recently mailed their property assessments to homeowners, so the average valuation increases are not yet available. 

Still, Hawaii County is already considering Bill 28, which would expand property tax relief eligibility to homeowners and affordable rental properties that are on agricultural land. And Maui County last year approved an increase of its homeowner exemption from $200,000 to $300,000 that will take effect next tax year.

Heltson said that depending on how their assessment figures shake out, Maui and Hawaii might want to also look at providing a one-time tax credit similar to Blangiardi’s proposal for Oahu

At the very least, Helton said, “[if] you live in your home, … check with your county. Make sure that you get that home exemption. Because that home exemption can reduce your tax bill.”

TRANSCRIPT

3-19-23 Jonathan Helton on the Johnny Miro show

Johnny Miro: Good Sunday morning to you, I’m Johnny Miro. It’s time for a public-access programming here on our five H. Hawaii Media Oahu radio stations: 101.1 FM, 101.5 FM, 97.1 FM, 96.7 FM and 107.5 FM. 

And joining me once again for a discussion on a topic of interest would be another one of the great researchers at Grassroot Institute — grassrootinstitute.org — with policy researcher Jonathan Helton joining me once again. Great to have you back, Jonathan, to discuss another important topic.

Helton: Yes, good morning, Johnny. Thank you for having me on the show. I am so glad to be here.

Miro: Love speaking to you folks and the listeners enjoy the information they get from Grassroot Institute. 

A lot of folks on Oahu have heard that the property values, Jonathan, are going up, and that that might mean higher taxes. I had your colleague, Malia Hill, on the show a few months back to talk about the issue, but can you give listeners a quick class in Property Tax 101?

Helton: Yes, I’d be happy to. 

And, so, just at a basic level, the county assesses the value of property every year. And to determine the value of property, they compare it to other properties that are similar that have recently sold. And so, that’s how they estimate how much your property is worth. 

And so, you know, as we all know, Oahu’s real estate market’s been really hot over the past couple of years, so property values have been going up quite a lot.

For example, this year, if you own a residential-class property, on average, those properties went up by 9% this year. So, yeah, that’s pretty substantial. 

And, you know, where the real estate market ties into tax policy is if your house has a higher assessed value, you know, that probably means it might have higher property tax bill this next year. 

And so, the counties, you know, adjust the property tax rates every year depending on, you know, what they want for the budget or how much the assessment changes. But, you know, assessments are up this year, and a lot of people are concerned that, “Hey, you know, I might have to pay a lot more in property taxes on my house.” For a lot of people that could be, you know, a pretty big problem. They don’t have a lot of extra income.

Miro: And with the five major islands and others, property taxes that are different on each of the islands. So let’s start with Oahu, where we are. Several ways some property owners can already get tax relief — can you talk a little bit about those programs, Jonathan?

Helton: Yes, I can. Thankfully, you know, our county, our City Council, has some programs set up so that if, especially if you’re a homeowner, you can already qualify for some property tax relief. 

So, there’s two big ones. The first one is the homeowner exemption. So if you live in your home, you own your home, you can qualify. And what this homeowner exemption does, it deducts a certain dollar figure from the value of your home. 

So right now, the exemption is $100,000. Let me give you a quick example of how it would work. 

So if you own your home, you live in your home, and your home has an assessed value of $ million — which, you know, I mean, that’s pretty common right now. The average home price is about that high. 

So if you had $1 million home, the $100,000 homeowner exemption would bring its taxable value down to only $900,000. So what that means is when the county goes in and they calculate your tax bill, your $1 million home would only be taxed as if it were worth $900,000. So, you know, that brings the value down a little bit, brings the tax bill down a little bit. 

And then the other program that Oahu offers, the other big program, they have a property tax credit that is also known as a circuit breaker. So if you are below a certain income and you own your home, you can qualify. 

What that means, real quick, just some nuts and bolts: If you have the homeowner exemption and you make less than $60,000 a year, then you can apply for this property tax credit, and then the county will say, if you qualify, it ensures that your property tax bill isn’t going be more than 3% of your income. 

So those are the two big ones we have right now: the homeowner exemption and the low-income property tax credit.

Miro: So this is basically what Mayor Blangiardi’s proposal would be as far as for property, for homeowners, is that correct? It sounds like that’s what he’s proposed.

Helton: Yeah, so …

Miro: Yeah.

Helton: Yeah, there’s kind of two different tax credits right here. So the first tax credit, this is the one that already exists, is for lower-income homeowners. 

Now the one that the mayor’s proposing, it’s $300 and it would only be for this upcoming year, and it would be for all homeowners. 

So right now, you know, anyone who is below a certain income can get the low-income tax credit. But the one the mayor’s proposing — that would be available to all homeowners on the island.

Miro: OK, how about the City Council? What are they proposing to do? Are they looking at anything other than tax credits to provide some tax relief?

Helton: Yes. So, they are looking at the tax credit that Mayor Blangiardi has proposed. That’s [Bill14], for anyone who’s interested. And there’s two other big ones that the council’s looking at. 

They’re looking at Bill 40, and Bill 40 would increase the value of the homeowner exemption, right? We just talked about that. But it would increase it from $100,000 to $110,000. 

And we were at the Council, we were at the County Council meeting earlier this week and they mentioned they might move that up to even $120,000. So, you know, anytime they increase that, that’s more off your home’s tax bill.

The other thing, they’re also looking at Bill 38. And Bill 38, again, goes back to that low-income tax credit — they’re looking at increasing the eligibility for that. 

So, those are the three big ones that they’re looking at. There’s been a couple of other things there they’ve discussed. And, you know, I’m sure as they evaluate the budget, a couple of other property tax bills — reform bills — will be proposed, and we’ll have a chance to see what they do.

Miro: I’m Johnny Miro. We’re talking with Grassroot Institute, a policy researcher, Jonathan Helton. Alright. 

Are they doing anything to help business owners? How about renters, Jonathan?

Helton: Yes. Great question. A lot of people have been asking about that. A lot of people are concerned, right? If they don’t own their home, if they’re just renting, and their landlord gets slapped with a higher property tax bill, is that going to increase their rent? 

Well, right now, there are not really any proposals before the Council to help businesses or to help rentals. Right now, if you are a renter or you have a long-term lease, under certain circumstances, you can claim that homeowner exemption, but that’s just in some limited circumstances. 

So, you know, there’s not any proposals, you know, and I think that that’s something the Council should probably take a look at, right? How can we help renters who might get, you know, who might have to pay higher rents because their landlord’s property tax bill went up? 

How can we help businesses? You know, we’ve got a lot of small businesses that have been struggling over the past couple of years and, you know, what are things we could do to help them? 

Maybe we could expand this one-time tax credit that the mayor has proposed — maybe we expand that to businesses. That’s just something I think that the Council should really consider and take a look at.

Miro: So what’s happening on the neighboring islands? You just covered Oahu. Are property taxes going up on those islands also, like Kauai?

Helton: Yeah. So, in terms of Kauai, I just want to point something out real quickly.

Miro: OK.

Helton: The property tax system in Hawaii is very special. In, you know, in a lot of other states on the mainland, the state government will set the rules for the property tax. In Hawaii, each county sets its own rules. 

So, we do know some things about Kauai. So, and on Kauai, the proposed budget it has a 10% rate cut for homestead and residential properties. So the rate cut is just, you know, they take the assessed value of the home, they take the tax rate, that’s your tax bill.

So, right now the proposed budget is going to lower tax rates for, you know, if you own your home, so that’s good. 

But Kauai is going to probably see its property tax bills go up for other types of properties. Overall, the budget that’s been proposed estimates that property tax revenues are going to increase by 17%.

Miro: Hmm.

Helton: And that just is because the property values on Kauai have increased. The Council’s not proposing to raise the rate on any other properties. Just that the values are increasing.

So, you know, that’s just a pretty big amount — 17%. If your tax bill goes up by that, you know, for a lot of people, they’re going to hurt. 

So, you know, maybe there’s, maybe there’s room again to look at, you know, what are some tax-relief programs for businesses or for renters? 

And I will point out before we move on to some of the other islands: Kauai already does have some relief programs in place, just like Oahu does, right? They have a homeowner exemption; they have relief programs in place for lower income families; and they have something that’s called an assessment cap. 

And — just real quick — an assessment cap is essentially a law that says if you own your home, the assessed value of your home can change by no more than, in Kauai’s case, 3% each year. 

So, you know, we have a hot real estate market all across the state. A lot of places, your homes, the value might increase by more than 3% a year, but the assessment cap guarantees that the home value — for tax purposes — can only increase by 3% per year. So they’ve got that special feature over there in Kauai.

Miro: OK, let’s go to Hawaii island. What’s the information coming from there as far as property taxes are concerned, or property tax relief?

Helton: Yeah, so, Hawaii has not yet released their property assessments yet. They just mailed them out to homeowners this week, actually. And they haven’t, you know, put together a public release about, “Here’s how much that went up all across the county,” so we don’t really know the total increase there. 

But we do know that the Council is considering a bill, that’s Bill 28, that would provide relief to homeowners and affordable rental properties that are on agricultural land. So that would be kind of a small tax relief measure just to make sure that, you know, if you live on ag-land, you can get some of the relief that’s available to homeowners.

Miro: And we have a new mayor [for] the city, the uh county of Maui, Richard — what, uh — [Bissen], I do believe? So anything new, any changes to the property taxes and some of the proposals that are being put forth by the new mayor for Maui County?

Helton: Yes. So, for Maui, it’s the same as Hawaii. They just mailed out their property tax assessment, and I think the mayor’s going to start hearing, is going to start proposing the budget. The Council’s going to start debating the budget within the next week or so, so, we’ll get a better picture there. 

Any listeners from Maui, you know, pay attention to that in the next couple of weeks — you’re going to see information on the property taxes probably coming out. But we do know — I think the big thing — is that Maui’s homeowner exemption is going to increase from $200,000 to $300,000 for this next tax year.

So, if you do own your home, you know, you’re going to see that relief. That’s relief that the Council passed I believe last summer. So that’s going to kick in this next tax year. So, you know, that’s a good thing, we’re happy to see that.

Miro: No kidding. Wow. 

Jonathan Helton from Grassroot Institute, and it’s grassrootinstitute.org for more — grassrootinstitute.org — Grassroot Institute of Hawaii. 

A couple of more questions, Jonathan. Let’s see, we’ve got the counties, they get a lot of their funding from these property taxes, right? So they might be reluctant to give up some of the higher tax dollars. What are some of the changes that Grassroot Institute would recommend?

Helton: Glad you asked that. I understand that for a lot of county lawmakers, right, property tax is the bedrock — that’s how they fund police, that’s how they fund fire, that’s how they fund a lot of the basic county services. So, I understand there’s some hesitancy to reduce the property taxes. 

But right now, with the real estate market so hot, with inflation, with the rising cost of living, I think that a lot of people are hurting, and I think that a lot of these county councils are recognizing that they might depend on the property tax for a lot of government services. But they also need to keep in mind that a lot of homeowners, a lot of business owners, a lot of renters, you know, they’re having to move from Hawaii to other states because of higher prices, higher taxes, so I think there is going to be some room for tax relief. 

So, just a couple of things that we would want to suggest for the county councils to keep in mind. 

So, No. 1, the simplest way to reduce property taxes is a rate cut. The council just passes the resolution that sets the rate, they lower the rate. That provides immediate tax relief — there’s no paperwork involved for property owners.

But, you know, a lot of councils, they don’t want to cut rates for whatever reason, but they might look at other sorts of tax relief. We’re seeing that here on Oahu, right? They’re looking at more targeted reforms for relief. 

They’re looking at, maybe we’re going to have a tax credit for homeowners. Maybe we’re going to have a higher home exemption. I think we would be very supportive of both of those things. They do — they’re not as, you know, they’re not as straightforward as a rate cut, but they do provide relief to homeowners nonetheless. 

I think that the other counties, you know, depending on what their assessments come in at — for Maui and Hawaii — they might want to look at providing some of those one-time tax credits.

I know Hawaii talked about giving a tax credit to businesses, or to some property owners last year. That didn’t get passed. 

Maybe this year, you know, inflation has gone up so much, maybe they’ll say, “Hey, maybe we do want to give a tax credit to some of these property owners, just to try to offset how much taxes are going up.” 

Now, I will say that when we testified on the mayor’s property tax credit last week, we did suggest, “Hey, maybe this $300 credit, maybe there’s room in the budget that you can increase that.” We suggested $380. But, you know, we’d be open to another figure. 

We hope that the Council is open to discussing this. You know, we’ve had some, I think, you know, that we’ve testified on some of the bills there at the Council, and I think that we’re probably going to see some property tax relief passed, at least on Oahu.

Miro: Alright. Let’s see, anything else you’d like to add before we let you go and enjoy the rest of your Sunday, Jonathan?

Helton: Yes, yeah, and thank you again. Thank you so much for letting me come on the show. 

I would say one last thing: If you’re a homeowner, check with your county. Make sure that you’re eligible for property tax relief. Make sure that you get that home exemption. Because that home exemption can reduce your tax bill. 

So if you own your home, you live in your home, check with the county if there’s any other requirements. And again, you know, it varies by county, so, you know, you’ve got four different counties, four different sets of requirements. 

But at the very least, you own your home, if you live in your home, make sure you have the home exemption. And that’s, I think that’s the major thing I would suggest.

Miro: Good advice. Great advice. Alright, Jonathan. Let the folks know how they can reach Grassroot Institute and find out and read some of the great policy papers you have over there.

Helton: Yes, that’s just grassrootinstitute.org. Grassroot — no s — Institute dot o-r-g. And if you want to reach out to us, you can, you know, email us at info@grassrootinstitute.org. We’d be happy to have a conversation.

Miro: Thanks for the great information. Hope to be talking to you soon, Jonathan, and enjoy the rest of your Sunday.

Helton: Yes, you too. Mahalo.

---30---

GRIH: Bill 14 (2023): Tax credit for homeowners should be more

GRIH: Resolution 2023-33: Institute suggests ways Honolulu can provide property tax relief

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