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Tax hikes would burden average Maui homeowners the most

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Maui County Council on April 16, 2024.
___________

April 16, 2024, 6 p.m.
Council Chamber, Kalana O Maui Building

To: Maui County Council
      Alice Lee, Chair
      Yuki Lei Sugimura, Vice-Chair

From: Joe Kent, Executive Vice President
           Grassroot Institute of Hawaii

RE: COMMENTS ON BILL 60 — A BILL FOR AN ORDINANCE RELATING TO THE OPERATING BUDGET FOR THE COUNTY OF MAUI FOR THE FISCAL YEAR JULY 1, 2024 TO JUNE 30, 2025

Aloha Chair Lee, Vice-Chair Sugimura and Council Members,

The Grassroot Institute of Hawaii would like to offer its comments on Bill 60, the proposed operating budget for fiscal year 2025.

We are deeply concerned about the effect of significant property tax hikes while Maui residents are already struggling from the effects of continued inflation and economic uncertainty.

The proposed budget includes a wide series of real property tax hikes, especially on owner-occupied homes.

Property tax rates for owner-occupied homes valued at less than $1 million would go up by 5.3%; for homes valued between $1 million and $3 million, by an astounding 25%; and for homes valued at more than $3 million, by 18.2%.

Tax rates on commercial residential properties would be hiked by 13.6%; transient vacation rentals would see a 2.6% increase across the board; and non-owner occupied homes would see property tax rates go up between 2.6% and 12%.

If enacted, these proposed property tax increases would comprise a heavy burden for local homeowners. The largest increase is aimed at homes valued at between $1 million and $3 million. Given that the median sales price for a single-family home on Maui is $1.3 million[1], this means that the largest proposed tax increase is aimed directly at the average Maui family.

Moreover, tax rates are only part of the picture when it comes to property taxes.

There is also the fact that property values help determine the total tax bill for local homeowners. This year alone, Maui single-family home prices have gone up by about 10%, and condominiums by more than 60%.[2] Thus, Maui homeowners are being squeezed both by rising home prices and rising tax rates.

Even without the proposed tax increases, Maui housing is on track to become even more unaffordable, hastening the exodus of Maui residents to the mainland or elsewhere.

Some might argue that the property tax hikes are needed to offset increased costs this year, especially costs related to the Lahaina response and rebuilding efforts.

However, much of the $140 million earmarked for an emergency management program is being funded by grants.[3] The required county match for those funds is only about $26.5 million.[4]

Meanwhile, the estimated increase in property tax revenues from fiscal year 2024 is approximately $51 million.[5] Add to that an estimated $45 million in revenue from the county’s general excise tax surcharge and a $260 million increase in grant funds,[6] and it would appear there is no need to raise property taxes at all.

At the state level, lawmakers are looking for ways to fund Maui relief efforts and have been asking Maui County to cut its budget where possible.

But this proposed budget includes only two minor line-item spending cuts: “Highways, streets and transportation” is set to decrease from $83.6 million to $82.3 million; and “social welfare” from $37.5 million to $34.7 million.[7]

Every other department is seeking an increase in expenditures for the coming year.

In short, there has been virtually no effort to cut spending, ease the burden on taxpayers, or redirect county funds to areas of greater need.

Maui is facing a challenging year as it works to rebuild and recover. Its residents need a break from higher taxes. Adding a massive property tax hike to last year’s GET surcharge would burden residents and the economy far more than any purported benefit to the county.

Rather than adding to the financial challenges of Maui’s residents, the Council should be seeking ways to reduce the budget and provide tax breaks to local families and businesses.

We urge you to remove all property tax hikes in the fiscal 2025 budget.

Mahalo,

Joe Kent
Executive Vice President
Grassroot Institute of Hawaii
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[1]Monthly Market Overview,” Hawaii Realtors, March 2024.
[2] Ibid.
[3] Richard T. Bissen, Jr., “County of Maui Budget Proposal, Fiscal Year 2025,” County of Maui, Office of the Mayor, March 25, 2024, page 187.
[4] Ibid.
[5] Ibid, p.7.
[6] Ibid.
[7] Ibid, p. 75.

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