Lowering Property Tax Bills Should Be High Priority

by Keliʻi Akina

Property assessments are up across the state — and they threaten to create a “silent” tax hike for Hawaii residents.

That’s because property tax bills in Hawaii’s four counties are linked to property assessments, so tax bills can increase even if the tax rates stay the same.

On Oahu, assessments for the fiscal 2024 budget were up 12.4% compared to the previous year. Assessments increased by similarly high percentages on each of the neighboring islands.

As a result, many homeowners and landlords statewide are concerned that this year’s higher assessments will mean higher property tax bills — again.

Across the islands, higher property taxes could make homeownership unaffordable for some residents; landlords might have no choice but to increase what they charge their tenants; and businesses might have to raise prices or cut back on salaries or other expenses.

Many county lawmakers have taken notice and would like to keep the cost of living down for constituents who already are living on the edge. To help out, the Grassroot Institute recently released a new report, “How Hawaii’s county lawmakers can provide tax relief to offset higher property assessments.”

As this new policy toolkit notes, lowering tax rates in response to higher assessments is the simplest way to lower tax bills, but it is by no means the only way.

Homeowner exemptions, tax credits and other specially designed relief programs can also help offset higher assessments. In fact, many such policies already exist in some form or another in each of the counties but could stand to be updated.

Two of the counties, Kauai and Maui, are already looking to simply change tax rates. Kauai Mayor Derek Kawakami has proposed a 10% rate reduction for homeowners and residential properties, while Maui Mayor Richard Bissen has asked for a lower rate on certain owner-occupied properties and a higher rate on other high-value owner-occupied properties.

As for other types of relief, the Honolulu City Council is looking at increasing the value of its homeowner exemption — which deducts a certain percentage or dollar amount of a house’s value for tax purposes — from $100,000 to $120,000, while Maui acted last year to increase its exemption from $200,000 to $300,000 for the upcoming tax year.

Honolulu, Kauai and Maui also offer property tax credits, or “circuit breakers.” These programs are especially helpful for individuals on fixed incomes, such as retirees, whose ability to pay might not be able to keep up with ever-increasing annual property tax bills.

In addition, Honolulu Mayor Rick Blangiardi has proposed a one-time $300 tax credit for all homeowners, regardless of income.

All of these tax-relief ideas, if enacted, would help offset this year’s higher property tax assessments. However, the question is: Will they be enough to offset future increases in property tax assessments?

By law, the councils are required to set the property tax rates every year. But ideally, they could adopt policies that take a longer-view approach to avoid tax bills going up simply because of inflation and higher property values.

As Kauai County Council Chair Mel Rapozo said during a recent radio interview, Hawaii’s property taxes “should be a formula based on the assessments at the time, so it’s much more fair and productive. Because, you know, we don’t touch tax rates, but the assessments go up. It is a tax increase… I want to see a much more objective way of setting these thresholds and exemptions that would relate to the market and not where it is just a method of collecting revenues for the county.”

If more of Hawaii’s county council members would think this way, Hawaii residents could maybe someday feel more assured that they will not be chased out of their homes, businesses or other properties just because they were unable to keep up with the state’s continually increasing real estate values.

KELIʻI AKINA is president and CEO of the Grassroot Institute of Hawaii.