Amended property tax rates better, but budget overall still excessive

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Maui County Council on June 3, 2025.
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June 3, 2025, 9 a.m.
Kalana O Maui Building,

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

From: Grassroot Institute of Hawaii
            Jonathan Helton, Policy Analyst

Re: REAL PROPERTY TAX RATES FOR THE COUNTY OF MAUI, EFFECTIVE JULY 1, 2025

Aloha Chair Lee, Vice Chair Sugimura and other members of the Council,

The Grassroot Institute of Hawaii supports Chair Lee’s changes to the proposed fiscal 2026 property tax rates.

In general, the Grassroot Institute would prefer to see no increase to any property tax rate for fiscal 2026, especially because higher property assessments mean that tax bills will increase regardless.

Currently, the Council’s proposed rates include rate increases for multiple tiers, which would further increase the tax burden for Maui residents. However, the amendments being considered today would trim the amount of that hike by about $9.5 million.

In lieu of keeping Maui’s tax rates stable — if not lowering them — Grassroot supports these amendments to reduce the tax rates for some property tax classes or tiers, as described in Table 1 below, though we regret that it also includes increasing the rate for one tier.

Table 1: Material changes from current proposed rates versus amendment

Note that the proposed tiers for the long-term rental class for fiscal 2026 are relatively stable compared to fiscal 2025 — which is a good thing to a point. But even so, the visitor accommodations in this class are projected to pay $35 million more in property taxes in fiscal 2026 rates than they did in fiscal 2025.^[1]

All this is happening even as tourism generally is taking a hit from federal and state policy decisions. For example, the Economic Research Organization at the University of Hawaiʻi projects that federal policy changes will reduce visitor arrivals to Hawaii by 4% over the next two years, reducing visitor spending by $1.6 billion.^[2] In a report issued May 9, UHERO pointed out that, in particular, the “pullback in Canadian travel will have an outsized impact on Maui, which in 2023 hosted more Canadian visitor days than any other county.”^[3]

In addition, the state’s decision to increase the transient accommodations tax by a 0.75 percentage point and apply it to cruise ships could reduce visitor arrivals and spending.

In short, the current economic outlook suggests that the county should be considering ways to reduce the tax burden on the visitor industry rather than increase it.

Beyond that, the proposed reduction in the Council’s initially proposed higher rates are welcome news, but the Council should reevaluate property taxes after the budget season ends to promote economic growth and affordability for all Maui residents. The Grassroot Institute encourages further analysis of property tax rates for fiscal 2027 and would welcome the opportunity to participate in that discussion.

Thank you for the opportunity to testify.

Jonathan Helton
Policy Analyst
Grassroot Institute of Hawaii
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^[1] Here, “visitor accommodations” includes the hotel and resort, timeshare, TVR-STVR and commercialized residential tax classes.
^[2] Carl Bonham, Byron Gangnes, Steven Bond-Smith, et al., “Federal Policies Push Hawaii Toward Mild Recession,” Economic Research Organization at the University of Hawaiʻi, May 9, 2025, p. 14.
^[3] Ibid, p. 14.