Kauai looks to simplify tax relief, increase homeowner exemption, add assessment cap

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Kauai County Council on Sept. 6, 2023.

September 6, 2023
8:30 a.m.
Kauai County Council Chambers

To: Kaua‘i County Council
      Councilmember Mel Rapozo, Chair
      Councilmember KipuKai Kuali‘i, Vice Chair

From: Grassroot Institute of Hawaii
           Jonathan Helton, Policy Researcher


Comments Only

Dear Chair and Councilmembers:

The Grassroot Institute of Hawaii would like to offer its comments on Bill 2901, which would increase the homeowner exemption by $20,000, repeal miscellaneous property tax exemptions and implement a 20% assessment cap for all classes of property not covered by the existing 3% assessment cap.

The Institute is supportive of increasing the homeowner exemption. Such exemptions offer tax relief targeted at owner-occupants. Increasing the exemption by $20,000 across the board — from $160,000 to $180,000 for homeowners younger than 60, for example — will assist local families in paying their yearly tax, utility, food, housing and transportation bills.

At the current rate of $2.59 per $1,000, all homeowners will save $51.85 per year from the additional $20,000 in exempt value. Kauai homeowners would save about $618,000 in total.

Though this amount may not seem like much, people living on fixed incomes or who make much less than the area median income will certainly benefit from the extra $50 a year.

Likewise, we believe the repeal of various exemptions will simplify Kauai’s tax code. As the Tax Foundation of Hawaii has written, “Complicated tax rules make compliance more difficult and costly for both taxpayers and the government.”[1]

Such little-used exemptions include for individuals affected with leprosy, property used in manufacture of pulp and paper, air pollution control facilities, fixtures used in manufacturing or producing tangible personal products and the automatic fire-suppression system.

Finally, the proposed new assessment cap will limit abnormally large assessment increases. Under the new cap, all properties other than those homeowner and residential properties that already receive the 3% assessment cap will see their assessed value increase by no more than 20% each year.

Given the hot real estate market of the past three years, this 20% cap will assist taxpayers whose properties increase in value by more than 20% year-over-year, thereby lowering their tax liability.

Low assessment caps, such as the county’s existing 3% cap for owner-occupied properties or California’s 2% cap under Proposition 13, have been shown to distort housing purchases.[2] However, the proposed 20% cap is high enough that it should not distort Kauai’s real estate market in any substantial manner.

At the last hearing, there was some concern that this 20% cap could disproportionately benefit owners of high-value agriculture or tourism-related properties. This concern could be addressed if the cap were limited to the owner-occupied mixed use, commercial and industrial classes.

Taken as a whole, the three major changes this bill makes would simplify Kauai’s tax code and offer tax relief to all island taxpayers.

Thank you for this opportunity to testify.


Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii

[1] Tax Foundation of Hawaii, “Guiding Principles,” accessed Aug. 4, 2023.
[2] Nada Wasi and Michelle White, “Property Tax Limitations and Mobility: The Lock-In Effect of California’s Proposition 13,” National Bureau of Economic Research Working Paper 11108, February 2005. See also Keith Ihlanfeldt, “Do Caps on Increases in Assessed Values Create a Lock-In Effect? Evidence From Florida’s Amendment One,” National Tax Journal, March 2011.

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