A bill that would allow taxpayers socked with an extra luxury home tax to donate that tier two tax to charity instead was postponed for tweaks Tuesday after drawing mixed reviews from the County Council Finance Committee.
The tax, approved last year, imposes $13.60 tax per thousand dollars worth of property value more than $2 million for property in the residential — or second home — category, compared to $11.10 in tax per thousand for the portion of the property less than $2 million. In contrast, the homeowner rate is $6.15 for a primary residence.
Bill 18, sponsored by Hilo Councilman Aaron Chung, would allow property owners to write off that $2.50 extra tax if they provide proof they donated the amount to a recognized nonprofit that benefits Hawaii County residents or to county-sponsored homelessness initiatives.
“This does not obviate anyone’s payment under the two tier setup,” Chung said. “These affected property owners will have to pay one way or the other. … We’re not letting people off the hook.”
Chung said nonprofits have reported reductions in donations since the tax went into effect, and some wealthy property owners had warned that their ability or willingness to donate to charity could be reduced by increased taxes.
But two testifiers and some council members took a dim view of the idea, saying government needs money to do its job, and it’s not unreasonable to expect the wealthy to pay more.
Jacqueline Ching of Puna had no sympathy, saying the bill “gives tax breaks to the filthy rich.”
“The taxpayers deserve every single dollar,” Ching said. “There should be no preference for anybody that has more properties than they need.”
Kohala Councilman Tim Richards, the sole dissenting vote on the tier two tax last year, liked the idea of giving property owners options. He thinks there is room for savings in county operations.
“I didn’t think we worked hard enough on the budget,” Richards said. “This bill is a step towards trying to correct things.”
Hamakua Councilwoman Heather Kimball said the bill could give the public the perception that wealthier taxpayers get a say how their tax money is used, but the less wealthy don’t. She described what she said is an overall regressive tax system that has the lowest paid 20% of taxpayers paying 11% of their income in taxes, compared to the top 5% who pay 2.2%.
“I think it is important and imperative that we as a body have a conversation about property tax,” Kimball said.
The county administration is currently working on its first budget under Mayor Mitch Roth. The mayor has to deliver a balanced budget proposal to the County Council by March 1 and then a final proposal by May 5. The council has the power to raise or lower tax rates and make budget amendments before sending it back to the mayor.
Finance Director Deanna Sako noted that the county last year upped its nonprofit grants from $1.5 million to $2.5 million. Nonprofits have also received $24.6 million in grants from coronavirus relief funds and another $4.2 million in property tax abatement.
“I watched millions of dollars to nonprofits go out,” said Finance Committee Chairman Matt Kaneali‘i-Kleinfelder. “A bill right now intended to remove $10 million from the budget, I don’t think is to the people’s benefit.”
Email Nancy Cook Lauer at email@example.com.
Source: Hawaii Tribune Herald