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The Honolulu Advertiser
Posted on: Tuesday, January 2, 2007

Owner-occupied plan offers real tax relief

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Homeowners should not have to make the choice between paying for their basic necessities or paying their rising property taxes.

That's the driving principle behind Mayor Mufi Hannemann's idea to protect those who live in their homes on O'ahu, and have no desire to sell. They are the people of the community, who live and work here 365 days a year and define our island life.

For these homeowners, Hannemann is proposing a special "owner-occupied" classification that would provide them with property tax relief.

This type of tax break would make a huge difference in the lives of many who would otherwise be taxed out of their homes.

The Neighbor Islands have already implemented the property tax relief with success.

On Maui, city officials said the exemption for residents of owner-occupied homes is $300,000. That means a person with a home assessed at $600,000 would only have to pay tax on half that amount, and at half the tax rate (2.5 percent per $1,000).

And if you own a $300,000 condominium, the exemption puts you at the minimum tax of $70 a year.

Maui even discovered a unique side benefit: By creating the new classification, part-time residents who primarily use their homes as vacation rentals end up paying the majority of the property taxes, and are subjected to the increases. Maui even has a special class for time-share owners taxed at the high rate of $14 per $1,000.

It all serves as a disincentive on the speculative vacation rental trade.

Establishing an owner-occupied classification in O'ahu could have the same effect here.

The City Council didn't approve the idea last year because of a concern over fairness. Councilwoman Ann Kobayashi, last year's Budget Committee chairwoman, said the council wanted to make sure tax relief went to those who need it most. There was also concern that tax increases to owners of rentals would pass the increase on as a cost to their renters.

Indeed, these are valid issues that need to be explored. But what could be more fair than protecting those who work here and live in the home they own? As for rent, that's a matter of what the market will bear, and not linked to property tax assessments.

An owner-occupied classification would protect year-round resident homeowners from being taxed out of their homes and their land.

That kind of investment in our community is worth a hard look.