Posted on: Sunday, February 20, 2005

EDITORIAL
Property taxes must not be set by formula

O'ahu's soaring property values have put local homeowners in a terrible squeeze, particularly those who are on relatively fixed incomes.

Values and property taxes keep going up, far faster than the incomes of those who must pay the bill.

So it is understandable that the City Council is looking seriously at new ways to ease the burden on local homeowners. It makes political good sense and it feels like the right thing to do.

But struggling homeowners and other property taxpayers should take the council's newfound interest with more than a small grain of salt.

The plain fact is that the council already has the power to set the property tax burden wherever it wants it. The only thing accomplished in many of the new schemes under consideration is to take difficult policy decisions out of the hands of the council and throw them to an arbitrary formula.

Perhaps the best example of this is one idea modeled on California's now-largely-disgraced Proposition 13. It would limit real property tax increases to 4 percent a year.

California's experience was this: After Prop. 13 put severe limits on increases in property taxes, jurisdictions over time had to take other approaches toward a steadily growing demand for services.

Some jurisdictions let their civic infrastructure crumble. Others scrambled for new levies on their citizens. In some cases, communities simply chose to pay privately for services they used to get from government.

We don't want to have that happen here.

As a practical matter, any attempt to limit or scale back property taxes in an arbitrary manner will face hard sledding with newly elected Mayor Mufi Hannemann, who warned last week that the city faces a severe backlog of unpaid bills.

While Hannemann has said he has no intention of raising property taxes, he clearly would like to keep them at today's level (with perhaps some adjustment in agricultural rates and perhaps some consideration for seniors on fixed incomes).

This last category, those of low or fixed incomes in homes with soaring values, offers the best hope for some cooperative action between the mayor and the council.

This would involve a "circuit breaker" approach that cuts off property tax increases at a certain spot, based on a person's income, age or some combination of those factors.

Clearly, there is no social good accomplished in taxing people out of their homes.

But if this group is to be given some relief, the money will have to be made up elsewhere. That calls for tough, thoughtful policy decisions that cannot be made by formula.