1000% Tax Hike Defeated on Maui

susan halasSusan Halas of Maui Watch discussed the testimony on a proposed agricultural measure with Joe Kent. The interview was recorded as part of the Grassroot Institute with Dr. Keli’i Akina, a radio show on KAOI and KAKU on Maui.

Susan explained that the proposed BF-70 measure on Maui, “Was raising the taxes on [agricultural] land, it was changing the farm site, it was saying that the county had to be able to tell you what you could grow and what you couldn’t grow, it was saying that you had to dedicate your land, and that you had to file plans; it completely ignored the recommendations of the committees that they set up.” The measure was defeated this past Thursday.

“BF-70, which has been so controversial and has made the farm people so angry, it’s dead,” Susan exclaimed. Susan Halas also praised councilmen Don Couch and Mike Victorino for helping to bring common sense and reason into the discussion.

But how exactly did a bill that would impact thousands so negatively make it this far? “Power tripping at the expense of the constituency” is how Susan explained it. “I’ll tell you what’s good about it,” she continued, “what’s good about it is every sector of agriculture came together to fight it back. I sat at the press table, and the history of that legislation goes back… to 2010… there was not one single positive comment–every single comment was negative.”

Listen to the full interview here:


Read the full testimony on BF-70 (Maui Ordinance Regarding Taxation of Agricultural Land) below:

To: Budget and Finance Committee
Mike White, Chair

From: Grassroot Institute of Hawaii
President Keli’i Akina, Ph.D.

Comments Only

Dear Chair and Committee Members:

The Grassroot Institute of Hawaii would like to offer its comments on BF-70, which would amend chapter 3.48 of the Maui County Code relating to real property tax agricultural classification.

The stated reason for the passage BF-70 is to deal with an unequal tax system that allows smaller homes to pay higher taxes than large lot “gentlemen estates”.

However, if tax inequity were really the issue, one solution would be to simply lower the taxes on everyone else.

Instead, the passage of BF-70 would increase the effective tax on large agricultural lands on Maui, in some cases by more than 300%, and this may have many detrimental consequences for our economy.

Presumably, the reason for the tax increase is to generate more revenue for the county, but this significant tax increase may not necessarily lead to the $19 million revenue increase as projected, because the calculation does not take into account the behavioral response of Maui’s agricultural producers.

As noted in the research by economist Margaret Stumpp, “Some property owners will respond to higher agricultural rates in various ways, such as by selling their land for development, or by formally dedicating their land to agriculture.”

For example, because of the new tax increase, many farmers may decide not to produce agricultural products on their farm, or they may choose to dedicate the land. This may result in less tax revenue for the county than projected.

Passage of BF-70 would require the Director of Finance to approve a farmer’s plans to grow crops or raise livestock. This would put the director in the position of assessing the “economic feasibility”, the “revenue-generating capability, and other criteria as may be appropriate in the director’s discretion.”

Not only is this a breach of property rights, but it opens the door for a government “taking” of property without just compensation, if the director chooses not to approve an otherwise economically and agriculturally wise plan.

Again, farmers who are not allowed to produce on their land as they see fit may instead decide to sell the farm, and leave the county, potentially taking their economic productivity with them in the process.

Finally, it must also be noted that BF-70 is in direct contradiction with Hawaii Revised Statutes Chapter 205 which states that agricultural land must be taxed based on “agricultural use value rather than fair market value”.

This conflict adds the potential cost of a legal battle for Maui County taxpayers as farmers and ranchers attempt to clarify whether they should follow State law or County code.

The added costs, the violation of property rights, and the loss of economic activity will likely lead to more fallow fields as farmers and ranchers decide to leave the business, adding to the 540,000 acres of lost crop and pastureland in Hawaii since 1980, according to a report by the Department of Agriculture.¹

The only option for some farmers will be to offer their land to high-end real estate developers who may not decide to use the land for agricultural purposes.

Fixing the problem of an “unfair” tax system by raising taxes in this matter will only result in more problems, and an even more “unfair” system.

Instead, policy makers might consider reducing taxes on those who currently suffer the highest burden of tax inequity. This would help create equity and autonomy while also providing Maui citizens the opportunity to contribute productively to our economy.

1. http://hdoa.hawaii.gov/blog/main/nrsalus2015/

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