Enigma is defined as a puzzle, something difficult to understand or complex.
This is the case with Maui's property tax system in that Maui County has probably the lowest property tax cost in the country, or at least is among the very lowest but spreads the cost in a manner that penalizes those who stay on their property and rewards those who speculate.
There are two reasons. The first is the fact that Hawaii is the only state in the country that does not pay for education using property taxes as the only source of revenue.
Secondly, Maui has chosen to have one of the most complex systems in the country and uses this fact to enormously limit the hardship on the homeowner by a variety of mechanisms such as a $2 per thousand tax rate, a $300,000 homeowner exemption and the circuit breaker, which significantly lowers taxes for the low-income homeowner (and, no, it is in no way restricted to seniors). Maui has 20 separate tax rates. Most states have two: homeowner and nonhomeowner or business.
COMET, the Committee for More Equitable Taxation, has put forth many concepts that have resulted in this idea of keeping property taxes as low as possible. For the last few years, our effort has been to get the present antiquated system replaced by a 21st-century system that would rein in spending and more equitably spread the cost of property taxes.
Long-term property owners are penalized over time because the present system is so cumbersome to administer. The number shown on your property tax assessment is 18 to 30 months behind reality. Thus, the number of appeals being submitted is many times higher than a few years ago. People are getting assessments that are significantly higher than market value. Meanwhile, people who buy and sell over short terms never have the antiquated system catch up to them.
COMET suggests that property be assessed at whatever the price was that was paid. This is called fair-market value and is significantly different than the "fair-market value" that is sent each year to property owners. Clearly, the system cannot go back 20, 30 or more years if the property has been held for that long. Thus, COMET suggests that for simplicity's sake, the last assessment be used if the property has not changed hands in the prior 12 months.
The second part of the COMET concept is that if a property does not change hands, then the maximum increase in assessed value of the property will be 4 percent or the federal cost of living used for Social Security adjustment each year, whichever is lower. This percent is published each October and is readily available for the following year's budget process.
Had this concept been used, COMET estimates that the County of Maui would have had $25 million to $40 million more revenue this year, and will lose even more if this concept is not implemented before next year's budget process.
Naysayers will complain that this is nothing more than a warmed-over "Prop. 13" from California, and one need only read The Maui News to hear about the state that California is in. Well first, Prop. 13 limits annual increases to 2 percent, which COMET feels is not enough in the 21st century. Most importantly, there are two parts to your tax cost: One is the assessment and the second is the tax rate. California has frozen the tax rate at 2 percent, while COMET has left this up to the County Council.
It is the assessments that are driving everyone crazy. They are wrong and unfair. If corrected by using the reassess at sale concept, revenue will go up! The tax rate then can be adjusted to fill in the gaps in extraordinary economic situations such as we have now.
How do we know this is true? In a report of the California Board of Equalization (that's the tax people), they reported that "two years ago, assessments went up 9.6% and last year 4.7%. Further, assessments increased 8.6% per year over the past 10 years." In other words, while Maui County's assessments have gone down, California's have gone up! They also do not have two years of backlog for appeals. Also, for those who have been following California's problems, please note that it is the state - not the cities and counties - that is in such dire straits. The state even considered "raiding" the county tax base to make up the state's shortfall. Why? Because the property tax system is working exactly like it is supposed to.
I hope the county administration and County Council will convene, in an open hearing, a meeting to discuss all points of view. COMET believes there may well be Maui specific concepts that could be added to the plan, and is completely open to discussion.
It is hard to understand that more revenue generated in a more equitable manner is anything but better for everyone. This is a true win/win idea whose time has come.
* Tony Fisher is co-chairman of the Committee for More Equitable Taxation. He lives in Kihei.
