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Tax cut great, Kent says; now let’s cut regulations

There is much to celebrate from the 2024 legislative session, including passage of a bill that if signed by the governor will provide Hawaii residents with the biggest tax cut in the history of the state. 

But during his latest appearance on the “Rick Hamada Program” on KHVH News Radio 830, Grassroot Institute Executive Vice President Joe Kent said there is still plenty of work to be done to reduce the cost of living in Hawaii. 

The tax cuts are great, “and we want to go further in that direction,” Kent told Hamada during the May 9 interview. “But if you really want to address the cost of living, it’s in the regulations” — a fact most clearly manifested, he said, in Hawaii’s housing market, where research shows regulations adding over $300,000 to the price of a condo unit. 

Kent said that besides the huge tax cut, other good bills still awaiting a decision by the governor would expand residential use in commercial districts, allow at least two accessory dwelling units on qualifying residential properties, issue temporary licenses for out-of-state nurses and exempt private-practice doctors and dentists from the state general excise tax  — all victories he attributed to community involvement. 

“People attribute it to the work that we did, but it’s really the work that all of our supporters did,” Kent said. “We have all these people on our email list who have been contacting legislators. We really want more support in this direction.” 

On the downside, Kent said, short-term rentals took a major hit as the Legislature passed a bill giving counties greater leeway to regulate and even ban them outright. 

Kent said Maui Mayor Richard Bissen has already proposed eliminating over 7,000 STR units, which, if enacted, Kent predicted will have little to no effect on the cost of housing in Hawaii and will instead “backfire” by opening the floodgates to costly legal battles. 

And given that STRs are currently the largest revenue generator for Maui County, a ban “is like a $200 million bite out of the county budget after we already had a big bite from Lahaina,” Kent said. 

To hear the entire conversation, click on the image below. A complete transcript follows.

5-9-24 Joe Kent with host Rick Hamada on KHVH News Radio 830

Rick Hamada: It is 8:40 on the mark. And Joe Kent, executive vice president of Grassroot Institute of Hawaii, is in studio with us. Joe, it’s good to see you as always.

Joe Kent: Good to see you too, Rick. 

Hamada: How was your week?

Kent: Pretty good, except I got rained on this morning walking to work. 

Hamada: Whoa! 

Kent: That’s why I’m wearing a sweater right now. Yeah. April showers, May showers.

Hamada: Yeah, I think in Hawaii it’s every day showers, windward to mauka, baby. 

Kent: Yeah

Hamada: Windward to mauka. 

Kent: Good.

Hamada: We have a lot to cover because we have all things that emerged out of the legislature. Dr. Keli‘i was with us last week. We walked through some of the cited accomplishments, but this whole business with TVR [transient vacation rentals] — the governor signing the bill, [Maui] Mayor [Richard] Bissen within 24 seconds authorizing his policy in TVRs on Maui. Can you help us understand this?

Kent: Yeah, so this all came from a lawsuit when Honolulu tried to ban short-term rentals. By ban it, they meant redefine it to be, like, a short-term rental is really six months or whatever. 

And then, so that got argued in court and they said, well, there’s this state law that protects the short-term rentals at the county level, and you’d have to change the state law first. So they said, OK, let’s change the state law.

So now, have at it. And just like you said, Mayor Bissen sprung into action. This is the quickest we’ve ever seen any politicians spring into action. [laughter] And anyways, he has banned or is proposing to ban short-term rentals. 

And this is all about something called the “Minatoia list” on Maui, which is basically 7,000 units that were grandfathered in to the short-term rental use in the apartment zones and so on. And this is billions of dollars of real estate. You know, you’ve got expensive real estate, many of these, and I’m not sure it’s gonna do what they think it’s gonna do. You know.” 

Where you’ve got, let’s say you have a one-bedroom condo that’s $900,000 and now you say you can’t do a short-term rental on it. So, OK, what happens? Does the owner sell? Yes, no, maybe? And if he sells, then does it go for a lower price because they can’t do short-term rentals?

And how low can we go here? Is this gonna be $100,000 off? 

Let’s say it’s $100,000 off, right? So now it’s a $800,000 one-bedroom condo. That’s not really affordable housing. 

Hamada: That’s right.

Kent: You know, that’s not really affordable for most people on Maui who are desperately needing housing. And so this isn’t gonna be, I think, the silver bullet.

In fact, they think this is the easy way to get to housing. This is the hard way, because now they’re gonna face lots of lawsuits. 

Just because you had that state law that was in the way of their efforts to ban short-term rentals doesn’t mean that there aren’t other strong arguments against these bans.

I mean, what about, what happened to private property rights? 

Hamada: Exactly.

Kent: And eminent domain — is this really a situation where if they tell you what you can and can’t do on your property such that they basically own your property at some point? Well, is that eminent domain? And then does the county have to pay billions of dollars more to, what, buy off these properties and so on or pay for the lawsuits? So I think this is gonna backfire.

Hamada: It is an absolute mess. The interesting part I cited with Chad [Blair] in a Civil Beat update is that FEMA [Federal Emergency Management Agency] has spent literally hundreds of millions to secure units for occupancy which remain unoccupied. And we’re looking around — where is the dire need and why aren’t people taking advantage?

Now there may be explanations as to personal and subjective reasons, but the money continues to flow and flow.

And now the seizure, if you will, of private property — a property owner not being able to decide what is best for his or her property. The American dream is to own property. This is like an American nightmare when the government seizes or denies the opportunity to use.

Kent: And there’s a lot of unintended consequences too. You’ve got the short-term rental category on Maui as the biggest revenue generator for the county budget. 

It was kind of funny at the state Legislature, they were saying, “Well, shouldn’t we ban these short-term rentals?” And the [Maui County] Council members were saying, “No, please don’t ban them because this is our budget.”

And so, what’s gonna happen to the county budget? This is like a $200 million bite out of the county budget after we already had a big bite from Lahaina. So yeah, this is ill-conceived.

Hamada: Yeah. I would, to invoke a bit of the immigration issue — no bueno. 

Getting an update with Joe Kent. 

The Maui Ohana Hope Village — we have had conversations in the past. Is it true?

Kent: It’s true for now. We’ve been down this road before. The Maui Ohana Hope Village, there on the Family Life Center land at the crossroads in Kahului, 88 units, temporary units, for the emergency needs. And they got their permits in April and then those permits magically whisked away. 

And then last week they got their permits again. And so now the story is like, yay, we can move in now. So that’s, I guess, a good thing if they keep those permits. 

The details are that a lot of this has to do with water and access to water, which I think they’ve secured now thanks to donors.

If you look at the community energy behind this project, there’s so many people who are rolling up their sleeves, volunteering their time, volunteering their money. This is millions of dollars, you know, probably $12 million at least, have been just donated from many, many different individuals towards this project.

But the one blockade has been the county process. And this is something that Grassroot Institute has been watching closely and speaking out about. 

We’ve published a lot of memos and things to government officials like, “Please” — you know, basically on our hands and knees — “can you please allow some relief and let the permits roll?” And so, magically they did.

That’s good and we’ll keep watching it, but there’s still a lot of issues with this. Trying to access the project, I went to the project a couple weeks ago and trying to access it is difficult.

You used to be able to access it off of Hansen Road, which was the easy way to drive in, but now that has been blocked. I guess the landowner — I’m not sure if it’s Mahi Pono or the farm there — they’ve said that you can’t go there through that way. So now you have to go off the other road, which is just right off of a highway, so it’s hard to get into there.

And there’s insurance questions too, of like, is this even gonna be insurable? Who bears the risk of all of this?

So there’s a lot of lingering questions about all of that, but at least they have the permits. 

Now that they have the permits, though, hopefully they can get the rest of the money that they need to build because it was like, “We can’t give you all these millions of dollars.” 

That was part of your question — where has all the money gone? Well, it’s sitting in a holding pattern, waiting for people to get their permits. So hopefully we’ll see some good news here.

Hamada: I was on Maui last weekend, and going by those units — just all built, all completed, all ready to go, and more than suitable. Definitely.

Kent: Yes, they have bathrooms. I know they have kitchens, refrigerators, air conditioners. They’ve got AC, they have sprinklers. My condo doesn’t even have sprinklers, by the way.

Hamada: And Joe’s address is … No, but I got, we have — time is always flying by with Joe Kent of Grassroot Institute. 

  1. Gov. Green’s tax cut. It’s lauded as historic and with a lot of superlatives, I understand, but what is it in regard to cost of living?

Kent: So I brought my tax calculator here. I don’t know if you have a calculator sound effect, but I have here, let’s say a family with an adjusted gross income of what, $80,000, one dependent — they’re gonna see a tax cut of $3,000 by 2031. Excuse me, I should say $18,000 in total by 2031. $3,000 for the year of 2031.

And so this is a tax cut that starts small, like this year $300, next year $1,000, the next year $2,000. But the thing about this — this isn’t like a rebate. Remember we used to have rebates where it was like, oh, we all got $300, right? Well, that was one year.

But this is a tax cut though, [that] is many, many years into the future. And what I’m interested in is the long-term effect that has on our cost of living, on our economy, and so on. 

So, yes, this is the biggest tax cut in the history of the state, possibly. Yes, it’s gonna be $5 billion in tax cuts by, you know, how many years? 2031, I think. But it doesn’t really solve the cost-of-living problem. You know, in my mind, cost of living is about regulations mostly.

Hamada: Amen.

Kent: I mean, if you had to choose whether or not it’s better to live in a government with high taxes or high regulations, the high regulations are worse. Because with taxation, OK, someone’s taxed, but at least someone gets the money. At least there’s activity going on.

With regulations, it stops activity. There’s no activity, and it leads to shortages, and shortages lead to high prices. 

Look at our housing laws. You know, UHERO did a study that showed that the cost of regulation adds — what — $300,000 to the cost of a condo unit.

And so, I’m really glad, we have to encourage lawmakers who are friendly to tax cuts and are starting to do that. That’s great and we want to go further in that direction. But if you really want to address the cost of living, it’s in the regulations.

Hamada: Amen. Amen, Joe Kent. News Radio 830 KHVH. 

Honolulu Council members actually cut the budget. They cut the budget?

Kent: Yeah, they did. [laughter]

Hamada: They cut the budget. Tell us about that.

Kent: OK, so remember the vacancies? There was like — sounds like ancient history — but a couple months ago, Council members at the Honolulu City Council were looking at how many vacant positions do we actually have in the budget? And it was like 2,400 vacancies. These are funded positions that some of them vacant for seven, eight years.

I don’t know if they have just like an empty office chair and a desk and like a picture frame with their what? That came with the frame when you bought it?

Hamada: That came with the frame, yeah.

Kent: I don’t know what’s going on, but apparently they’re funding all these positions, why? And so the Honolulu City Council, led by Tommy Waters’ push, actually cut those positions, and now that’s a $40 million bite out of the budget.

That’s good, but the budget’s not done. The budget on Monday is going into a special hearing. I never like when they have special anything, by the way.

Hamada: Amen.

Kent: But anyways, this is a special budget hearing and they’re looking at a lot of the amendments that Council members are making. And I want to — some council members see a budget cut as an opportunity. 

Hamada: Oh.

Kent: That’s not really how you want to view a budget cut, by the way, because it’s an opportunity to fill it in.

You know, the way I view budgets is, there’s a lot of details, but there’s a top line. And as much as you can do to reduce the top line, then that’s how much you can reduce taxation and benefit the people. 

But the way many council members and lawmakers view the budgets, if you reduce the top line, that’s an opportunity to fill it in so that you can maintain the line where it used to be.

Hamada: Amen.

Kent: So we have to watch that closely with the council members on Monday, many of whom have made amendments to hike spending. And it’s a lot of detailed things like, OK, more spending for vehicles or things like that, so …

Hamada: Hey, I appreciate that update and 8:55 in the morning. Up against the clock, I got to get this in. When we come back, we’ll finish things up with Joe Kent in our studios. And once again, 8:55.

[Commercial]

Hamada: It is 8:57 of the morning, wrapping things up with Joe Kent of Grassroot Institute of Hawaii. First of all, how do we reach out and learn more from Grassroot, and how can we help and support, Joe?

Kent: Well, thanks for asking. So the Grassroot Institute is at grassrootsinstitute.org. We have a newsletter of over 40,000 subscribers that read our stuff. And we had so many wins this year at the Legislature.

Yes, people attribute it to the work that we did, but it’s really the work that all of our supporters did. I mean, we have all these people on our email list who have been contacting legislators and so on. We talk to legislators behind the scenes to try to get good ideas in their hands to pass.

And this has been the winningest year at the Grassroot Institute. So we really want more support in this direction. 

If you want to help change Hawaii for the better, visit grassrootsinstitute.org and we take donations too — we’re a nonprofit. We have a lot of staff that care very deeply and are trying to change Hawaii for the better. 

We don’t have a lot of staff [laughs]. We have a small team, but yeah, we need more though. So if you can dig into your wallet or your even your bitcoin wallet if you want to, we take bitcoin too. So head over to grassrootinstitute.org.

Hamada: What do you anticipate will be the headline dominant the next time we meet next week?

Kent: Well, I think people are still filtering through the big wins at the Legislature — how we’ve got housing wins, nursing wins, doctor wins and, of course, even more tax wins. So now it goes to the governor’s desk.

Hamada: And we’ll talk about that desk, perhaps the next time we get together.

Kent: Yes, absolutely.

Hamada: All right, Joe. Thanks so very much for everything.

Kent: Thanks so much.

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