WAILUKU - Maui County Council members will revisit a proposal to lower the property tax home exemption to $200,000, which would still be the highest in the state, at a meeting next week.
The Budget and Finance Committee will meet at 1:30 p.m. Tuesday in eighth floor Council Chambers of the Kalana O Maui building to discuss the measure, which had been deferred by council members last year. Under the plan, the exemption would be reduced from the current level of $300,000, the highest in the state.
Also at the meeting, council members will consider a proposal meant to tighten qualifications for the home exemption and make it easier for county Finance Department officials to crack down on taxpayers who don't meet the criteria.
In the early 2000s, the county's homeowner tax exemption was as low as $50,000. The council voted to increase the tax break multiple times over several years, as a plan to ease the burden on homeowners who were seeing their property values - and taxes - skyrocket in a booming real estate market.
"We are now experiencing property taxes going back down," Council Member Joe Pontanilla said.
With homeowners currently able to deduct $300,000 from their property's taxable value and paying just $2.50 per $1,000 of assessed value for their property tax rate, Maui County has "the highest home exemption in the state and the lowest tax rate in the state," Pontanilla noted.
Honolulu has the next highest home exemption, at $80,000.
The council members first considered lowering the exemption last year but deferred the measure. Several council members said at the time that they would be open to more incremental changes.
"I'm thinking that probably again will be part of the discussion next week," Pontanilla said Friday.
A separate proposal on the agenda would increase the requirements needed for a property owner to qualify for the homeowner exemption.
Among other changes, the proposal would disqualify people who rent out their entire home for a portion of the year, as well as people who file state income taxes as nonresidents or part-time residents.
It also would give the finance director more authority to require taxpayers applying for the home exemption to show proof of their residence, including a copy of the person's income tax return.
Delinquent taxpayers also would not be allowed to receive the home exemption, under the bill.
Maui County Council Member Mike White said he introduced the proposal in consultation with the county's Real Property Tax Division because he thought that some taxpayers were "taking advantage of the homeowners' exemption when they may not have been bona fide homeowners."
He noted that the requirements to qualify for a residential rate at the Waiehu Municipal Golf Course are currently more strict than what's required to qualify for the homeowner exemption.
"There are a number of areas where our property tax system has significant inequities, and this is one of them," he said.
Paula Newell, of the Committee for More Equitable Taxation (COMET), said the idea of tightening enforcement on people taking unfair advantage of the homeowner exemption "probably wouldn't be a bad idea."
But she said her group was very concerned about any plans to reduce the homeowner exemption.
"We would not be very happy about the $200,000," she said. "They told us they were not going to be touching that, and I guess that's something they didn't hold to."
She said her group was most concerned about the county's tax assessment process, and a system that allows speculators to drive up home prices, inflating property taxes for neighbors.
She said Maui was "different" from the rest of the state because it had more severe speculation and a more dramatic real estate bubble. That's one reason she felt it was appropriate for the county to keep its home exemption at $300,000.
She also said the five original members of COMET regarded the exemption as one of their biggest accomplishments, and that lowering it now would be a disservice.
"They worked really hard to get that $300,000 exemption," she said.
* Ilima Loomis can be reached at firstname.lastname@example.org.