LIHUE — When voters cast their ballots in November, one of the issues they’ll be deciding on is a Constitutional Amendment that would establish a surcharge on investment real property.
The proposed amendment is drawing ire from both Hawaii’s business community and all four counties because they say the tax would increase the already high cost of living across the state and set a precedent of allowing the state Legislature to dip into a county source of funding.
The question asks: “Shall the Legislature be authorized to establish, as provided by law, a surcharge on investment real property to be used to support public education?”
Because of how the act is written, there’s no guarantee that monies collected would go directly to teachers and students, opponents say. They say the ballot question itself is written in a way that makes it sounds good, but doesn’t paint the entire picture of what the amendment would do if passed.
“The Constitutional Amendment says or reports that it will support public education, but that’s simply not the case. The way the bill is written, the way the amendment is written, it’s very vague,” said Mark Perriello, president of the Kauai Chamber of Commerce. “It doesn’t actually guarantee any more money to our school systems and it will really raise the cost of living for folks here on Kauai and throughout the state.”
Even if residents don’t own a home, the passing of this amendment will cause a ripple effect, said Kauai resident Marissa Sandblom.
If anyone on Kauai rents property, they might not be aware, but they’re probably going to feel the consequences when their landlords receive this increase in their property tax, they’re going to have this difficult choice of taking it on themselves or passing it onto their tenants,” she said.
Perriello, Sandblom, Realtor Chad Deal and business owner Dennis Esaki met with a reporter and editor of The Garden Island newspaper on Thursday to share their concerns about the amendment.
Consumers would also see an increase in costs, she said
“A lot of our shopping centers could be considered investment properties so a lot of shops will see their cost of doing business increase,” she said.
The Kauai Board of Realtors doesn’t support this amendment.
“You’re going to be paying for this. It’s either going to be an increase in rents or an increase in mortgage payments,” said Deal.
Esaki, who owns Esaki Surveying and Mapping, said the bill harms people it’s designed to help because teachers pay mortgages and rent.
“We just think this is not the right avenue for supporting education,” he said.
At the 1978 Constitutional Convention, the state gave powers to the county to collect property taxes. This amendment will change that precedent and allow the state to dip into county funding, said Deal, who sits on Kauai’s Board of Realtors.
“It opens Pandora’s Box for the state to start taxing real property,” Deal said.
Property taxes are currently the main revenue sources for the counties.
According to the Affordable Hawaii Coalition, which opposes the amendment, the state Department of Education’s budget is about $2 billion, and the state’s per-pupil spending of $13,748 is nearly $2,000 higher than the national average.
The coalition was formed to inform the public about the negative effects of this proposed constitutional amendment and to stop this new tax. It is urging business leaders to speak to other businesses and community organizations; provide information to employees; write letters to the editors of local newspapers and post information on social media.
All four counties filed a lawsuit against the state, arguing the ballot question was unlawfully vague and that the state Legislature didn’t follow proper procedures in passing the measure.
A First Circuit Court judge ruled late last week that the counties did not meet the standards required for granting a preliminary injuction.
Perriello said the Kauai Chamber of Commerce is against this amendment because it’s going to have a huge impact on the state’s business community in a negative way.
“When it comes right down to it, this is going to raise costs for a lot of our businesses, but more importantly, those costs are going to get passed onto consumers, and that’s not what we want,” he said.
The amendment is simply a bad idea, Perriello said.
“Our keiki are our next government leaders, our next business owners, our next employees, and so we want to support education, we do a lot to support education, but this bill doesn’t actually do that,” he said.
The money could be spent any way the Legislature sees fit because they can take the money from the general fund, Perriello said.
“That means the amount of money we’re spending as a state on education doesn’t even necessarily increase,” he said.
The Hawaii State Teachers Association has pushed for a dedicated funding source for years. HSTA President Corey Rosenlee recently downplayed concerns that the tax would be charged on anyone other than owners of pricey second and third homes.
“No one wants to tax mom-and-pop stores. No one wants to tax residents,” Rosenlee said in an interview last week. “They’re just saying that to make people afraid.”
One of the issues with the amendment is that the act’s draft contained a lot of detail about where the money would go and how it would be spent, but none of that’s in the final version, Sandblom said.
What came out of the process was the broad definition of “supporting public education,” she said.
“We love and support our teachers. This is not the right vehicle to support them and, actually, it’s kind of ironic because it could come back to do more harm. There are teachers who rent, teachers who shop. There’s going to have all these unintended consequences because of what the final bill looked like,” Sandblom said.
Perriello said Hawaii’s business community would like to work with the Department of Education and state lawmakers on finding a better solution for funding education than this amendment.
Bethany Freudenthal, crime, courts and county reporter, can be reached at 652-7891 or firstname.lastname@example.org.