Opposition rises to tax proposal

  • Photo courtesy Kauai Chamber of Commerce

    Mark Perriello

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 bfreudenthal@thegardenisland.com.

  1. Kauaiisfun September 14, 2018 3:54 am Reply

    Tourism takes in billions. So lets tax the tourists more and more so they don’t come and see how the island will maintain itself.

  2. Manawai September 14, 2018 7:13 am Reply

    Renters beware of this amendment. It will impact the amount of rent you pay as property owners will pass the increase on to you. This amendment will hurt those most unable to afford it. Think about it!

  3. Oingo boingo September 14, 2018 7:29 am Reply

    Yes we need to tax those investment properties and not worry about all the scare tactics….remember rent is allready ridiculous at like $1500 for a studio…give me a break….

  4. RG DeSoto September 14, 2018 7:53 am Reply

    Hawaii’s education system’s per capita spending is already one of the highest in the nation. This same system consistently receives a “D” in national rankings. DOE does a stellar job of missing the mark.
    Throwing more money at the DOE will do absolutely nothing to improve the quality of education in Hawaii. All it will do is place a greater burden on us all. How typical of Hawaii’s democrats to target businesses and investors. Hawaii is ranked as one of the most anti-business states in the country and the legislature is poised to confirm this despicable reputation. Shame on them.
    RG DeSoto

  5. Palani September 14, 2018 8:11 am Reply

    Hawaii already has a double-standard for property taxes. Off-island owners already pay a lot more in property taxes than local residents. Adding a surtax to those that are forced to rent out their properties to be able to afford the already high taxes will force some out of their houses. This is just another attempt to milk those trying to make ends meet. Houses will be sold to big money developers, the only ones who can afford to pay the taxes.

    1. manongindashadow September 14, 2018 12:22 pm Reply

      Any relation to William Palani from Utah?

  6. justmyopinion September 14, 2018 8:25 am Reply

    Many, if not most of these same arguments can be made about any and all tax increases. The fact is, the best way to provide additional funds to educate our children and provide better pay for our teachers is to eliminate some of many administrative positions in our state’s education system.

  7. Republican September 14, 2018 9:52 am Reply

    Democrat State, D’nesh Dsouza was right: Death of a Nation. Democrats wants to take money from those who have it and give it to those who don’t. Here is an example for you Kauaiian’s. 2 Cows:
    Socialism: Government takes cows and gives milk to the people
    Demoncrat: Government tax Cow owners so owner can’t afford to own cows, milk becomes expensive
    Republican: Cow owners compete with other cow owners, so milk price drops
    Capitalism: Sell one cow buy a bull. U get it.

    Democracy does not work, look at cuba, venezuela. Case in point.

  8. imho September 14, 2018 11:09 am Reply

    Support the tax. Education is priority.

  9. John Zwiebel September 14, 2018 4:29 pm Reply

    If we need funds for education, why don’t we bring the troops home from (for example) Afghanistan?

  10. MisterM September 14, 2018 5:34 pm Reply

    Sigh. So we can’t ask the 1% to pay a bit more? Get a grip people. Somebody has to pay taxes to maintain schools, roads etc. If not the 1%, then who should pay? Clearly, the current tax base isn’t sufficient.

  11. Facing Future September 14, 2018 8:04 pm Reply

    Aloha: Please read this summary of the Con AM presented by HSTA and then decide on the Constitutional Amendment based on facts, not scare tactics:

    “SB 2922, if approved by a majority Hawaii’s voters in the Nov. 6 General Election, will amend our State Constitution to establish an additional dedicated funding stream for education by taxing “investment real property.” State Senate and House leaders have been very clear, and Kidani restated their intent once more on the Senate floor late last [2018 Legislative Session], that this Constitutional Amendment is to tax second homes valued at $1 million or greater, which would generate hundreds of millions of much needed dollars each year for our schools.

    The average homeowner would not be affected, because owner-occupants are exempt from this surcharge. Even someone who owns a second or third property, such as an apartment or condo, would not be subject to the surcharge as long as each of those properties isn’t worth more than $1 million.

    This bill addresses two problems at once.

    First, Hawaii’s schools are chronically underfunded, with our state ranking last in the nation in the percentage of state and local revenue spent on our public schools. Persistent underfunding has led to a chronic teacher shortage, higher class sizes, cutbacks to arts, vocational and Native Hawaiian courses, unequal access to preschool programming and more.

    Second, we are the only state that doesn’t use property taxes to help pay for public education, leaving us with the lowest property tax rates in the country. Real estate speculators have taken advantage of our low property tax rates to use Hawaii as their own private Monopoly board, driving up our cost of living by purchasing investment homes at prices residents cannot afford to pay. Last year, for example, 60 percent of all condos on Maui were owned by nonresidents. We must increase funding for our schools and stop wealthy investors from distorting our housing market. Our ConAm will do just that.”

    A lot of the arguments against the Constitutional Amendment are scare tactics. How many of you are residents who vote, and have children in the public schools as well as own a second property over $1 million in Hawaii? Not very many is my guess. Speculation on real estate, such as what we see in Hawaii is does impact the quality of life; rental and home prices are skyrocketing as investors who have no vested interest in our state as a place to live and raise families, grab up properties to make money to live well ELSEWHERE. This amendment makes sure that funds collected through this tax will go to public schools, not elsewhere. The HIDOE does need to be more accountable, but even if they were 100% efficient with all of their annual funds to run the only statewide school district in the country there STILL would not be enough money to fully fund public education, and that includes that there are enough certified teachers in the classrooms. Hawaii loses teachers every year due to low salaries and the high cost of living, which in turn creates larger class sizes and less support for each individual student in our state. This constitutional amendment is a direct and simple way to ensure we prioritize, as voters, as residents in Hawaii, what is our best for OUR keiki, and our future, by funding public schools.


  12. Manawai September 15, 2018 8:37 am Reply

    All business owners who lease their premises will be hit with higher CAM expenses that include the property’s property taxes. This means consumers’ prices will rise.

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