LIHUE — The Kauai County Council on Wednesday killed a proposal to increase property taxes for around 200 Kauai residents with rental properties.
Bill 2767 sought to close a loophole in county property tax laws that allows some short-term vacation rental property owners to pay about half the rates imposed upon other transient vacation rentals, according to the bill’s co-authors, Councilmembers Luke Evslin and Mason Chock.
The bill failed to garner support needed to pass second reading at Wednesday’s meeting after pushback from community members who testified against the bill at recent public hearings, saying the proposal would unintentionally impose an undue financial burden on hundreds of residents who rely on meager rental incomes to keep pace with ever increasing taxes.
“Over the years, our property taxes have doubled. And again, and again, always keeping our profitability in check. Now we stand to have our taxes double once again,” said Bruce Fehring, a farmer and 33-year resident of Kilauea, who spoke out against the bill.
“We make our living by growing produce for consumption by the local market,” Fehring told the council at Wednesday’s meeting. “Do we get rich by farming? No. But we love working the land and supplying the public with the fruits of our labor.”
Evslin said the bill was killed, after “strong testimony” from Fairing and other farmers, combined with a lack of support from the county Finance Department.
Finance Director Reiko Matsuyama said at the council meeting that a stipulation in the bill exempting those who earn less than $45,000 a year on their property from the higher tax bracket would present difficulties for an already overburdened and understaffed finance department.
Tracking state tax returns of the 200-plus property owners affected by the bill to determine their annual rental incomes, would be “really, really hard for us,” Matsuyama said, explaining that those with multiple properties could submit different tax returns for each individual rental operation, leaving the process vulnerable to fraud.
Councilmember Luke Evslin, who co-authored Bill 2767, said there are already penalties in place to prevent people from filing fraudulent state tax returns, but Matsuyama said the fines are little deterrent and basically nothing more than “a slap on the wrist.”
One of the bill’s most vocal opponents, Councilmember Felicia Cowden, said she was “deeply relieved” when the measure died. Cowden said she spent countless hours in the past several weeks listening to those who would have been inadvertent casualties of the bill, hundreds of whom, she maintains, would have been taxed out of their homes.