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TAX MAN: The constitutional amendment returns again

Back in 2018, we as voters were inundated with impassioned arguments on both sides of a proposed constitutional amendment (“ConAm” for short). The amendment would have given the state the power to impose a surcharge on real property tax, ostensibly to fund teacher pay raises.

The Hawai‘i Supreme Court voided the ballot question associated with the ConAm as vague and misleading in City &County of Honolulu v. State of Hawai‘i, 143 Haw. 455 (2018). It’s now another election year. A bill to put forth a similar ConAm, House Bill 1537, is advancing in the House.

Have the proponents of education funding learned their lesson from 2018? We wonder about that.

The ballot question that the Hawai‘i Supreme Court found confusing in 2018 read: “Shall the legislature be authorized to establish, as provided by law, a surcharge on investment real property to be used to support public education?”

The ballot question in HB 1537 is: “Shall the legislature increase funding for public education for all of Hawai‘i’s children and adults by establishing, as provided by law, a surcharge on residential investment property valued at $3,000,000 or greater, excluding a homeowner’s primary residence?”

In 2018, our supreme court stated that proposed constitutional amendments and their corresponding ballot questions are required to be phrased in clear language that is not likely to deceive or mislead voters as to their nature and effect. The court complained:

(To) fully appreciate the scope of the proposed change, a voter would need to know that the Hawai‘i Constitution provides independent taxing power to the counties; that the constitution currently allows only the counties to tax real property to the exclusion of all other government entities; and that the proposed amendment would make an exception to this exclusive authority of the counties by granting the state concurrent authority to tax what is presumably a subset of real property. None of this information is conveyed by the ballot question, which is instead likely to leave the average lay voter with the false impression that a vote in favor of the amendment would allow investment real property to be taxed in the first instance.

Yes, there are differences between the 2018 proposed ballot question and the current one. The 2018 question spoke of surcharging “investment real property,” while the current one talks about “residential investment property, valued at $3,000,000 or greater, excluding a homeowner’s primary residence.”

In neither case does the ballot question mention the word “tax.” Maybe in 2018 voters could figure out that a real property tax was being contemplated because that year’s question expressly referred to real property. This year’s question does not even mention “real” property, so voters could be faced with a “surcharge,” whatever that means, on “residential investment property,” which perhaps could be mobile homes or even shares of stock in Hilton or Marriott. In that respect, the ballot question is even more vague than in 2018.

And how does the current language answer the supreme court’s complaint that the ballot question fails to mention the county’s exclusive authority to tax realty and that the proposal would alter it? The short answer is that it doesn’t.

And finally, how do we even know whether the money raised by this surcharge is even going to be used for education? Even if it is all sent to the Department of Education (DOE), there would be nothing to prevent the legislature from shorting DOE in the regular budget now that it has an independent source of funding.

The counties all oppose the bill. For one thing, the counties’ bond holders (creditors) would be upset if the counties lost control over their primary source of repayment. If this bill passes, then, look for the battle lines to be drawn the same as last time. If the Hawai‘i Supreme Court is going to follow its precedent, the future of this measure looks bleak unless major changes are made to it.


Tom Yamachika is president of the Tax Foundation of Hawai‘i.
Source: The Garden Island

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