EXEMPTIONS RAISE PROPERTY TAXES (Testimony presented to the City Council)
February 23, 2007
Council Members, my name is Paul Smith and I am Co Chair of LET HONOLULU VOTE; a non partisan effort to amend the City Charter so voters can have initiative power over taxes.
Who among us has boarded a flight or checked into a hotel and later found that another person got the same trip or the same room at a much lower price? Probably everyone has had this experience.
All but three of the property tax measures up for discussion today are going to reduce fairness and increase the complexity for Honolulu property taxpayers. None will make our system more fair, predictable, honest, or transparent. For example:
- Bill 5 homeowner exemption
- Bill 7 owner occupant classification
- Bill 11 tax credit
- Bill 12 owner occupant exemption increase
- Bill 13 disabled exemption increase
- Bill 15 eligibility for tax credit
- Bill 16 onetime credit
- Bill 17 cap assessment based on years in home and
- Bill 18 exemption for 70 year old
The purpose of my testimony is to highlight the inequity in our property tax system and to encourage Council members to be honest and fair with residents - property owners and renters.
For example, many residents are paying the full property tax rate on the assessed value of their home, apartment, or property. But you, Council Members, know that in reality most residents pay extra tax to make up for all those property owners and renters who have exemptions and pay nothing or, at best, a simple $100 per year processing fee.
Honolulu exempts so many properties and organizations from paying property taxes that the impact on regular residents is significant.
I challenge the City Council to make public a list of all exemptions and credits showing the amount by which these exemptions reduce total revenue to the City compared to what would normally be collected if all properties were treated the same.
Such a list of “lost” revenue is really an essential prerequisite for the Council’s overall tax rate setting discussions. I assume that Council Members realize that exempted properties do benefit from tax funded roads, sewer, fire, police, and ambulance service, sunset on the beach, parks, and many get full trash pickup services even though they do not pay for such services.
Let’s be honest. Most taxpayers, I believe, would expect to find recognized churches or charities on the list of exempted properties. But, I wonder how many taxpayers know that their neighbor’s house may be exempt from paying property taxes? For example, all DHHL lands, plus the buildings on the land, are property tax exempt. State and Federal buildings/properties are tax exempt. Any designated historic building and even “mind relaxation groups” are exempt from property taxes.
Again, I challenge the Council to provide a complete listing of all EXEMPTIONS so the Council and the public can learn what residents pay to support those who pay nothing.
In your action today, please do not complicate the property tax system with added credits and exemptions. Instead, do your job, and provide predictability and accountability. I suggest:
- Reduce the number and complicated credits and exemptions and/or raise the minimum filing fee;
- Pass an ordinance to automatically adjust the tax rate each year so that the new rate produces the same revenue as the previous year. Then increase taxes only through public legislation on which each of you must vote. Such an ordinance would eliminate the stealth tax increase when assessments rise;
- Control expenditures by demanding that the City increase productivity yearly.
I urge that you stop the merry-go-round of additional legislation and the pandering to groups and instead start from scratch to rebuild our property tax system so it is fair, honest, predictable, and transparent.
The measures you are debating today will almost certainly make property taxes more unfair, complex, and misunderstood by residents even if you do succeed in placating one group at the expense of another.
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