WAILUKU - After a contentious debate about a proposal to tax homes on ag land the same as residential properties, Maui County councilors could push back that plan in favor of first creating a system for farmers to receive tax benefits by dedicating their land to agriculture.
Under the proposal, landowners would receive a discount on their property's taxable value, depending on how long they dedicate the property for agricultural use. Landowners who seek a 20-year dedication would receive a bigger benefit than ones who pledge to farm for only five years.
During the period of dedication, the landowner would have to use the property for agricultural purposes and would not be able to develop it, at risk of losing the tax benefit and paying a penalty.
Council Member Riki Hokama noted that council members had initially believed that addressing inequalities in how agricultural house lots were taxed should be the first in a series of reforms to the agricultural property tax system. But speaking at Monday's meeting of the council Budget and Finance Committee, he said the council should lay the groundwork by establishing a system for agricultural dedication.
"Dedication, I believe, is the top priority," he said. "I feel that that cannot wait."
Council Member Gladys Baisa agreed, noting she heard from scores of farmers and ranchers in her district who were concerned about the house-lot bill.
"I want to thank him for listening," she said. "What Mr. Hokama is saying is what they're saying. They want to see the dedication bill done first."
Budget Chairman Joe Pontanilla deferred action on the proposal, saying the committee would take it up again in May.
Council members had been considering a measure that would require the lot under a house on agricultural land to be taxed according to its fair market value. The proposal would only affect the portion of the property being used for a house; land actually being farmed would continue to receive the agricultural tax assessment.
Under the current system, the taxable value of the house lot is calculated as a percentage of what the total property is worth.
That often results in a significantly lower taxable value than what a similar lot in a residential neighborhood would be assessed.
Council members had said the system is unfair because it treats taxpayers differently, with homeowners in residential districts subsidizing not only the farms but also the living space of people on agricultural lands.
"We're simply saying a homesite is a homesite," said Council Member Mike White.
But the proposal raised an outcry among farmers, ranchers and agricultural landowners, who said it would amount to a tax increase.
"To tax us, to compare us to people living in Kahului, there's no reality in that whatsoever," said David Moran, who noted that residents of agricultural lands don't receive the same level of government services as those in urban areas.
Many noted that they use their farmhouse as an integral part of their farm operation, doing their bookkeeping and planning at the kitchen table, storing materials and packing produce in their garage, and even nursing a sick calf or goat in their living room.
"To say that this is not part of the farming? I don't think so," said rancher Ronald Sakugawa.
Many also expressed concern that an increase of even $100 to $400, which is what property tax officials estimated would be the average change to property tax bills, could put already-struggling small farmers out of business.
"It seems unfair, because it's really tough being a farmer," said Mary Jo Masters.
The county should "tax the pretenders and not the real farmers," said Victor Pellegrino.
"Yes, there is a disparity, and yes, the false farmers who live on ag land should pay a residential tax, but it should not be imposed on the true farmers," he said.
* Ilima Loomis can be reached at iloomis@mauinews.com.
