Property tax system urgently needs an overhaul
Maui’s real property tax system is slow, incompetent and unjust. It requires an overhaul as soon as possible.
Here’s the problem: An owner has to apply for a homeowner’s tax exemption by the end of December in any year. That application pertains to the financial year starting in July, fully six months later. Why does the department need six months for this process? Is it not yet in the computer age?
Whatever the reason, the effect on homeowners is that they are taxed at the property’s current classification.
Thus, if a buyer closes a house-purchase deal in January, he is stuck with the current tax level until July of that year, when it defaults to the highest level regardless of the owner’s status.
Then, when that new owner applies for the exemption at year’s end, he or she will continue to pay the high rate until July of the following year because of that six-month lag. Even a year-round resident can end up paying the high rate for 18 months.
As far as I can tell, the money is never rebated. The tax board penalizes homeowners simply because they bought their property at a time inconsistent with the inflexible schedule used by the tax collectors.
This penalty can be quite high. In the case of my condo, it adds $3,000 every six months to what I should be paying as a year-round resident.
Where is the justification for this?