LIHU‘E — In 1981, all County of Kaua‘i properties were levied the same effective tax rate regardless of who owned them or how they were used.
Over the course of 42 years and 130 ordinances, the county has steadily added layer upon layer of complexity to the system, creating the byzantine tax code used today.
Some changes have made the tax code more progressive. Vacation rentals and investment properties are now taxed at a substantially higher rate than owner-occupied dwellings, putting more of the tax burden on those who are more able to pay. Those who rent out apartments for relatively low prices receive a significant tax break through the Long Term Affordable Rental Exemption.
Other changes can confuse taxpayers and strain county services, while providing questionable benefits. The code includes more than 20 tax relief programs, including tax breaks for alternative energy production, historic homes, houses that have safe rooms, and property owners suffering from leprosy.
The Historic Preservation Dedication Exemption creates a $469,781 tax break for just seven total properties, most of which are owned by residential investors or used as vacation rentals.
After a four-hour county Finance Department presentation before the Kaua‘i County Council on Wednesday, Council Chair Mel Rapozo called for a streamlining of the tax system.
“At the end of the day we gotta find a way to simplify the code, limit the number of programs and exemptions, and help the people that need to be helped,” said Rapozo.
The complexity of the tax code creates problems for the Finance Department’s Real Property Tax Office, which reported their workload had been increasing.
“We have applications we have to process and monitor,” said Real Property Tax Manager Mike Hubbard at the council meeting. “On top of that, we have to value 37,000 properties.”
An internal study by the International Association of Assessors recommended the office hire 15 more staff members exclusively focused on assessment. But filling these positions is difficult. There are currently three vacancies in Real Property Tax Assessment and 12 across the entire Finance Department.
Though tax rates have not
increased recently for most homeowners, tax bills were higher last year because property assessments increased.
In fiscal year 2023, the average owner-occupied home (excluding commercial home use) paid an additional $80 in property taxes, with an average bill of $1,477.
But the effective tax rate is lower for the county as a whole — and much lower for owner-occupied properties — than it was in 1981. While in 1981, owner-occupied homes were levied at $8.70 per $1,000 of assessed value, in 2022 they only paid $1.77.
Owner-occupied properties make up 27 percent of total assessment value, but they only account for 9.4 percent of total tax yields, with vacation rentals, investment properties and hotels shouldering a higher percentage of the tax burden.
“Yes it’s complex, but we have all these tax relief measures to ensure that the average homeowner has a low effective tax rate,” said Council Member Luke Evslin. “Let’s fix the cracks, but the system is working pretty well for average homeowners.”
•••
Guthrie Scrimgeour, reporter, can be reached at 808-647-0329 or gscrimgeour@thegardenisland.com.
Source: The Garden Island
Be First to Comment