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Potential for harm from misguided tax policy

Changes in property tax policy merely shift the tax burden from one group of property owners to another. Clearly, the higher priced properties are owned disproportionately more — as second homes — by part-time Maui residents.

Before we embark on yet another means of increasing the tax burden to our nonvoting second homeowners, consider that we already charge second homeowners vastly higher taxes than we do residents. How vastly? Take, for example, a condo valued at $1 million. A resident is charged $2,320 in annual tax, while a nonresident second homeowner pays $6,310 — 2.7 times the amount the resident pays.

For property in short-term rental service, the tax goes to $10,750, which is 4.6 times the resident owner’s rate. This despite the fact that the rented property adds much more to the tax base via general excise taxes and transient accommodations taxes — and employs many.

The above numbers use current tax rates and account for the $200,000 homeowner’s exemption.

I’ve seen property tax policy in many different jurisdictions and have never seen anything near this level of punitive treatment of nonresident property owners. I doubt it exists anywhere in the U.S. outside of Hawaii. And there always seems to be an effort underway to make it even more unbalanced.

This is not pono. It’s also shortsighted, because at some point nonresident investors will “get it” that they’re being taken advantage of and stop investing — and that would be a disaster for the tax base and the local economy.

Dave Wagner

Kihei

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