The county Department of Finance is taking a dim view of a proposal by Kohala Councilwoman Margaret Wille to give some homeowners a bigger tax break on their primary residence.
Wille, at a meeting Monday of the Real Property Tax Stakeholder’s Task Force, said she wanted to increase the base amount exempt from property taxes from $40,000 to $60,000. That, she said, could make changes the task force is contemplating to close loopholes “more politically acceptable” to fellow County Council members and the public.
That would cut another $123 from the annual tax bill of the 17,400 homeowners claiming the base exemption, but cost the county about $2.2 million more in lost taxes. It would affect only homeowners who are younger than 60 years old who do not claim higher deductions the elders are entitled to.
Wille said the county will save much more than that by closing loopholes, and it is appropriate to share those savings with the homeowners.
Another part of the package would require people to file Hawaii income tax returns with the state Department of Taxation in order to qualify. The county Real Property Tax Division wouldn’t get copies of the tax returns, or information about what is on the forms. Instead, the fact that a form was filed with the state Tax Office would serve as proof that the property owner is indeed a state resident and qualifies for the property tax break.
The task force is also looking at ways to close loopholes in the agricultural exemptions.
“We increase our chances of getting the whole bundle through, which will give us more savings than loss,” Wille said. “I want people to get behind what we’re doing.”
But Finance Director Nancy Crawford and Real Property Tax Administrator Stan Sitko were skeptical, saying the County Council has the power to adjust taxes annually when it sets tax rates. That’s a better avenue than adjusting exemptions, they said.
The administration currently has no way of estimating how much more taxes will be collected once loopholes are closed and abuses thwarted, Sitko said. Besides, said Crawford, the county needs the money.
“Two point two million buys a lot of supplies or equipment or tools,” Crawford said. “Rather than being more generous with homeowner exemptions, I would rather see some of the fruits of the enforcement efforts (used for county goods and services).”
Task force member Stewart Hussey said the task force should be able to strike a balance, and do both.
He described the process as a “good start on quantifying a balanced package of revenue enhancement on one hand and tax relief on the other.”
The task force hopes to have some bills ready to present to the County Council before the year is out.
Property owners claiming the homeowner’s exemption currently get $40,000 of property value deducted from their assessment, thus lowering their tax. The deduction increases for seniors, the disabled and veterans. A property owner older than 70 gets a $100,000 exemption , with an additional $50,000 for disabled property owners.
In Hawaii County, about 40,000 property owners claim the homeowner’s exemption. To qualify, they must assert the property is their primary residence. The exemption currently automatically renews each year.
Checking the homeowner’s exemption list against vital records and tax returns was one of 40 recommendations in a 99-page March 2012 report by the International Association of Assessing Officers. The task force was another of the recommendations.