Editor’s note: This is the second of a two-part commentary. The first was published Friday. In my last article I discussed the ill-considered action that the council took last year in repealing the limit on annual tax increase for taxpayers
Editor’s note: This is the second of a two-part commentary. The first was published Friday.
In my last article I discussed the ill-considered action that the council took last year in repealing the limit on annual tax increase for taxpayers in the Homestead class that had been adopted in 2006. While the limit had changed from the initial 2 percent to the increase in the Honolulu Urban Consumer Price Index, it was providing an effective barrier to any substantial tax increase for our residential homeowners.
The state of Hawaii has determined that its counties need to rely on taxation of real property as the principal revenue source for their government. It is the duty of Kauai County officials to enact and administer the property tax law fairly and reasonably. A cardinal rule for all responsible taxation is to target predictability and avoid all change unless mandated.
Home ownership is a pillar of our society. Our people should be encouraged to make the investment of their lives and fortunes that is required for such ownership. Our government should seek to reward, not punish it. Our resident homeowners and their families should never have to face taxes or tax increases that are unexpected or calamitous.
Last year’s repeal of the annual increase limit that had been enacted to protect resident homeowners was for many a brutal assault on their justified belief that continuing home ownership would not entail massive increases in their property taxation. Nearly half of the Homestead class had troublesome tax increases.
The rationale for the repeal of the cap was that one of its effects was that owners of comparable value property were incurring different tax liabilities. This justification does not rise to the importance that would warrant a change and its use violated the cardinal rule. It is a normal pattern of the real estate market that values tend to rise over time. It is to be expected that when one taxpayer purchases similar property at a later date it will have a higher price than that paid by the earlier buyer. However the whole purpose of the limit adopted in 2006 was to protect a buyer of his or her residence from the subsequent vagaries of the real estate market and the pressures presented by governmental spending. The intent of the council when the cap was adopted in 2006 was to recognize that home buying is an important milestone for most and that it is important to isolate the buyer as much as possible from the risks that could make the purchase unaffordable. That factor is a continuing one and it far outweighs the concept that resonated among property tax officials and some council members that all properties with equivalent value should be equally taxed.
Bill 2556 introduced by council members Rapozo and Kagawa following considerable testimony at the council’s Aug. 28 workshop by complaining taxpayers would reverse the hasty and ill-considered repeal of the increase limit and would restore reassurance to our resident homeowners that our government honors the importance of keeping the commitments made to preserve the affordability of home ownership contemplated when the home was acquired.
The bill provides for the restoration of the tax increase limit as it existed at the time of its repeal in 2013, for the tax year 2014 to make the tax liability the same as 2013 and for a credit to be applied in 2015 for 2014 tax overages paid because of the repeal of the limit.
The purported reason for the limit repeal was fostered by our tax collectors and failed to take into account the thoughtful convictions of our homeowners who have strongly supported by vote the principle of protecting owners from unexpected and large increases in their tax burden. Any council member who does not subscribe to the principles of Bill 2556 should understand that he or she stands against the concepts that citizens have warmly supported here on Kauai and elsewhere as to how they wish to be governed and may expect to face their righteous anger at election time.
On Wednesday, Bill 2556 had its first reading in the council and in ordinary course a vote on it will happen in the next fortnight. It is to be hoped that it will be adopted unanimously by our council, but it is vital that it receive at least five votes as our mayor could exercise his veto rights if a lesser vote occurs.
Fairness for our homeowners compels the passage of Bill 2556.
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Walter Lewis is a retired attorney who lives on Kauai and writes a regular column for The Garden Island.
