Tax may double on sale of pricey homes

By Sean Hao
Advertiser Staff Writer

State legislators yesterday advanced a bill that would increase the cost of buying high-priced homes to help support land preservation and affordable housing development.

Senate Bill 1517, which was passed by the House Committee on Economic and Business Concerns and will require review by the Finance Committee, would double the conveyance tax levied on the sales of homes priced at $600,000 and above.

Under the bill, the conveyance tax would remain at its current rate of 10 cents for every $100 in value for homes below $600,000.

It is one of only two proposed tax increases still being considered by legislators this session. Unlike a separate bill that would raise an estimated $80 million by increasing the general excise tax, raising the conveyance tax would generate only about $1 million more in general funds, according to the state Department of Taxation.

The increase would double conveyance tax collections to $19.6 million, with an estimated $6.8 million going to the rental housing trust fund, which provides low-interest loans and grants for lower-income housing, as well as $6.8 million to the natural area reserve fund, which helps manage natural resources such as forests and watersheds. Those revenue estimates are based on a prior version of the bill and do not take into account a graduated tax increase proposed by House members yesterday.

The bill also increases the allocation of conveyance tax revenues for both special funds from 25 percent to 35 percent of conveyance collections. The remaining 30 percent would go into the general fund.

Sen. Kalani English, D-6th (E. Maui, Moloka'i, Lana'i), said he introduced the bill to support efforts to manage invasive species such as the aquatic weed Salvinia molesta, the brown tree snake and the fast-spreading Miconia calvescens plant.

"We stand to lose, if we don't deal with the invasive species issue (and) if we don't deal with preserving our environment," English said. "This is what we sell to tourists and our own people and yet we can't care for it properly."

The bill is supported by several environmental groups, including Kahea, The Nature Conservancy of Hawai'i and the Sierra Club. It is opposed by the Hawaii Association of Realtors, which contends that raising the conveyance tax makes it harder to afford a home.

Sen. Gary Hooser, D-7th (Kaua'i, Ni'ihau), a bill co-sponsor, said raising the conveyance tax on high-priced homes only increases the burden on wealthy and often absentee homeowners.

"The real estate market is booming and a lot of it is luxury homes," he said. "It's not going to deter those people from buying a home."

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.