The following commentary was originally published in The Garden Island on Saturday, April 8, 2023.
It’s budget season on the County of Kaua‘i, which means county lawmakers have been busy haggling over what to fund and what to cut in Mayor Derek S.K. Kawakami’s proposed $402 million budget.
The proposed budget contains provisions that would increase county employee salaries, pay off county debt and buy new county equipment. It even contains a 10% property tax rate cut for homeowners, including owners of apartment, rental and other residential properties.
However, it doesn’t include any property tax relief for businesses or farmers, who also have seen their costs skyrocket over the past two years.
For example, if the property valuation of a small business in Lihu‘e increased by $100,000 this year, the owner or owners would be looking at an extra $810 on their tax bill.
That $810 might not break the bank for some entrepreneurs, but it’s an extra expense on top of higher material and transportation costs, energy prices and inflation.
It’s also money that the business could put toward employee bonuses, building repairs, community projects or other productive uses.
For a more specific example, I recently ate at local favorite Hamura Saimin in Lihu‘e (I must say, it was delicious). The tax bill for the property it sits on, unless something changes, will go up by about $350.
Permit records don’t show that the owner did any big renovations last year, but its assessed value went up anyway.
I don’t profess to know anything about the restaurant’s finances, but at a minimum, a higher tax bill could mean higher prices for a bowl of saimin, fewer renovations or several other small, individually insignificant changes.
Added up across the island, such small changes can have a cumulatively negative effect as business owners take home less pay, employees miss out on pay raises or less aging equipment is replaced.
At a recent Kaua‘i County Council meeting, I suggested a range of ways the council could provide relief to commercial, industrial, agricultural and commercialized home-use properties. These options included extending the proposed 10 percent rate cut for homeowners to these other property classes, as well.
The Council could also freeze the amount of money it collected from each of these classes at last year’s levels, which would translate to lower rates overall.
These options would “cost” the county around $3.5 million and $5 million, respectively. But with the big windfall the county is projecting due to higher property values and inflation, it could easily afford to extend property tax relief beyond just homeowners.
To put the windfall in perspective, the county is projecting it will take in about $220 million in property taxes next year — up from $187 million last year and $157 million from the year before.
In other words, the county can afford to extend its proposed tax break for homeowners to businesses and farmers.
At a time when businesses and consumers alike are tightening their belts, Kaua‘i County officials should also be looking to rein in their spending, if only to help island residents survive these tough economic times.
Kaua‘i’s small businesses and farmers are critical to the local economy. Their hard work helps prevent the island from being wholly dependent on tourism as an economic engine.
Homeowners and renters are seeing housing costs go up, and so are businesses and farms.
As the Council debates its budget, meaningful tax relief for business owners and farmers should be a top priority.
Jonathan Helton is a policy researcher at the Grassroot Institute of Hawaii.