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Circuit breaker tax credit overdue for being updated

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Maui County Council on June 7, 2024.
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June 7, 2024, 9 a.m.
Council Chamber
Kalana O Maui Building

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

From: Jonathan Helton, Policy Researcher
           Grassroot Institute of Hawaii

RE: COMMENTS ON BILL 85 — A BILL FOR AN ORDINANCE AMENDING SECTION 3.48.810, MAUI COUNTY CODE, RELATING TO THE CIRCUIT BREAKER TAX CREDIT

Aloha Chair Lee, Vice-Chair Sugimura and other Councilmembers,

The Grassroot Institute of Hawaii would like to offer its support, along with one suggestion, for Bill 85 (2024), which would modify the County’s “circuit breaker” tax credit by increasing the value of the credit and its income and home-value eligibility limits.

Maui’s circuit breaker offers relief to people who own and live in their homes and have filed for property tax homeowner exemptions. The program applies to residents who have annual household incomes of $100,000 or less and have received the homeowner exemption for at least five of the past six years.

In addition, the home must be valued at $750,000 or less for the homeowner to receive the full value of the credit, but homeowners whose homes are valued at between $750,000 and $800,000 can receive between 80% and 20% of the credit’s value.

The program works by capping the tax bill of the homeowners at no more than 2% of their household incomes, provided that the value of the credit does not exceed $6,500. For fiscal 2025, 400 taxpayers — mostly aged 70 years or older — will receive $293,838 from the credit.[1]

This bill proposes three important changes: It would increase the maximum value of the credit from $6,500 to $8,200; the annual income limit from $100,000 to $126,000; and the eligible home value from $800,000 to $1.1 million.

Increasing the maximum value of the credit is a good idea because it would offset some of the effects of increased assessments and higher tax bills.

The income limit was first imposed in 2013 and has not been adjusted since.[2] Meanwhile, area median income has increased by 19%, from $84,900 to $101,100,[3] so the proposed 26% increase in the annual income limit would more than offset the increase in Maui’s annual median income, creating a buffer that would allow the Council to wait a few years before increasing it again.

The law’s home-value limit was last increased in 2020, from $550,000 to $800,000.[4] But since the median sales price of single-family home on Maui has increased by more than 67% since then, from $747,150 to $1.25 million,[5]  an update is in order here too.

Increasing the value limit from $800,000 to $1.1 million would comprise almost 37.5% increase, which would boost — but not completely offset — the value of the circuit breaker for families who have seen their home values skyrocket.

Our suggestion is that the Council replace the schedule in the bill with the following:

Overall, this bill would still be a good step toward ensuring that the circuit-breaker tax credit keeps up with changes in home values and growing county incomes.

Thank you for the opportunity to testify.

Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii
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[1]Selected Real Property Statistics for Budget Consideration FY 2024-2025,” Maui Real Property Assessment Division, pp. 25-26.
[2]Local Option Circuit Breaker (Honolulu, Kauai, and Maui Counties),” Significant Features of the Property Tax, Lincoln Institute of Land Policy and George Washington Institute of Public Policy, accessed May 1, 2024.
[3]Maui County Income Schedule by Family Size 2023,” Hawaii Housing Finance and Development Corporation; and  “Maui County Income Schedule by Family Size 2013,” Hawaii Housing Finance and Development Corp.
[4] Maui County Ordinance 5108 became law on Aug. 13, 2020.
[5]Statewide Housing Statistics,” Title Guarantee, February 2020, accessed April 29, 2024; and “Statewide Housing Statistics,” Title Guarantee, February 2024, accessed April 29, 2024.

 

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