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The Honolulu Advertiser
Posted on: Friday, February 19, 2010

After 17 years, $100 fee could use a nudge

Honolulu, like most local governments, sets up its tax structure with a goal of drawing a fair share of support from all sectors of the community. Nonprofit institutions such as schools, churches and hospitals are cut a lot of slack on their property tax bills, and that seems reasonable.

But at a time when the pain of the recession is affecting nearly every organization on O'ahu, even well-established tax exemption policies should be reviewed.

It makes sense that the city should try to tap a little more support from organizations that have seen no change in their bare-minimum property tax rate in 17 years.

Rix Maurer, the city's budget chief, rightly argues that it's time to revisit the $100 minimum tax charged to nonprofits, although the solution is not to throw the organizations into the same class as other property taxpayers. A modest increase for nonprofits and owners of registered historic property is rational.

Even doubling or tripling the $100 minimum would not add to the burden significantly. There are close to 3,000 churches, hospitals, schools and other nonprofits paying the minimum tax, so even doubling the tax to $200 a year would only put a total of $600,000 in the city cash register, or about the cost of 20 police cars.

Still, as everyone has witnessed during this grim downturn, every dollar counts. And these institutions count on police, fire and municipal services as much as property owners paying the full rate.

Beyond a measured increase in the minimum rate for nonprofits, it's also high time that the city reconsider the entire structure of the categories for exemptions. A tiered schedule of property tax rates should be considered, one that differentiates between, for example, the nonprofit reporting $100 million in revenue and the rural church leading a hand-to-mouth existence.

The survival of the nonprofit sector is essential to society. It represents 7 percent of the work force nationally, but beyond labor issues it performs a vital function. Charities can more effectively stitch together the safety net of social services than direct government intervention. This is why, at the federal and local levels, taxation is either forgiven or reduced drastically.

That basic framework should remain in place, but the expectation that O'ahu nonprofits can pay a little more in property taxes is entirely justifiable.