Making property taxes less taxing

Property Taxes

A few weeks ago, Hawaii homeowners received their 2017 property tax assessments. It was not a pleasant way to end the holidays or start the new year.

I understand why there are property taxes. Government needs tax revenue to pay for city services such as roads, trash pickup, and utilities, and it can’t pay for those services through excise taxes and user fees alone. With land in Hawaii valued at over $335 billion, the Hawaii collected $1.7 billion through property taxes in fiscal year 2016-2017 alone, according to the Real Property Assessment Division.

What I don’t understand is why property taxes need to be so taxing or – or so arbitrary. We have a property tax system that is based on the property values (sales) of our neighbors. It’s based on what other people buy, and that is neither fair nor reasonable.

Here is a three-fold proposal to make property taxes less taxing:

  1. Arrange monthly tax payments. Instead of two hefty tax payments in February and August, Hawaii counties could allow homeowners to make monthly property tax payments. This would let homeowners spread out the payments over 12 months (as many homeowners already do by combining property taxes with their mortgages), and give county governments a steady stream of tax revenue. To reduce billing costs, government could offer this option only for automatic payments from a bank account or credit card.
  1. Create a flat property tax fee based on lot type and building square footage. Instead of basing property taxes on property valuation (and sometimes “speculation”), we could create flat property taxes based on lot type (residential, commercial, industrial, hotel, agricultural, conservation, and unimproved) and building square footage. With a flat property tax, anyone could calculate and budget for their taxes once the property tax rates are announced. There would be no valuations, no need for an appeals process, and no worries if a neighboring property is sold for an inflated price.
  1. Require reasonable limits on property taxes. Instead of property values and tax rates rising without constraints, require reasonable limits to tax increases. For example, county governments could limit increases to the rate of inflation each year or to a dollar amount, such as 35 cents per year. This would allow property owners to more easily budget tax increases and require government to operate within a budget, instead of arbitrarily raising taxes to meet increased spending.

 How do you think we can make property taxes affordable while still providing basic city services? If you are a homeowner or landlord, how affordable are your property taxes?

 

 Clipart by cgvector.

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2 Comments on “Making property taxes less taxing”

  1. Randolph Slaton Says:

    Hi, Rachel,

    I came across your post and the timing was perfect as having reading the news yesterday I began wondering whether it’s time to raise the issue of requiring non-profits to pay property taxes instead of taxing everyone else more? This idea outrages many, of course, but it’s a way to pay for the rail.

    Randy Slaton
    Honolulu


    • Hi Randy, your suggestion that non-profits pay property taxes sounds fair — especially for investment properties that generate income. I do think we should keep the exemption for property that is directly used for charitable purposes, such as services, office space, etc. Since some charities may be land-rich but cash-poor, maybe non-profits with property that generate income could pay property taxes based on income, rather than assessed value? Thank you for reading Better Hawaii! aloha, Rachelle


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