WAILUKU - A proposal to restore the county's homeowner property tax exemption to 2005 levels was recommended by the Maui County Council Budget and Finance Committee on Tuesday.
The committee voted 6-0 to pass the measure on to the full County Council. If approved, the bill would set the exemption at $200,000, down from the $300,000 exemption taxpayers get now. That would net the county about $5.3 million in additional property taxes next year if the tax rate for homeowners stays the same. If approved, the lower exemption would take effect in July 2012.
Also Tuesday, the committee voted unanimously to recommend a separate bill giving the county Finance Department more tools to crack down on taxpayers who claim the homeowner exemption illegally.
Council Members Danny Mateo, Mike Victorino and Don Couch were excused from the meeting.
In supporting the lower exemption, council members noted the county increased the homeowner exemption multiple times to offset soaring property values during the real estate bubble. The basic exemption increased from $50,000 in 2003 to $300,000 in 2006.
Now real estate values are declining, council members noted Tuesday.
"It's not asking them for more taxes than they've paid in the past," said Council Member Mike White.
Homeowners, who make up about half of the county's taxpayers, paid about 15.9 percent of all property taxes in 2005, but that's dropped to just 7.3 percent today, he noted.
"This is a tough one," said Council Member Gladys Baisa. "I do believe the time has come that we're going to have to do something about what we're charging our homeowners."
Property values are expected to decline by another 5 to 10 percent next year, dragging tax revenues down with them, said Budget Chairman Joe Pontanilla. Maui County has by far the highest exemption and lowest homeowner property tax rate in the state.
Maui's current exemption of $300,000 is more than three times the $80,000 basic exemption now offered in Honolulu, the next highest in the state. Kauai now has a basic exemption of $48,000 and the Big Island $40,000. All three other counties offer higher exemptions for the elderly.
Maui's property tax rate of $2.50 per $1,000 of assessed value is also the lowest in the state. Honolulu is next-lowest, with $3.42; Kauai is $3.72 and the Big Island is $5.55.
In a separate action, the committee endorsed a proposal that would tighten enforcement of the homeowner exemption. Among other changes, the bill proposed by White 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.
"The proposal would really help us in giving us the tools we need," said county Finance Director Danny Agsalog.
* Ilima Loomis can be reached at firstname.lastname@example.org.