Property Tax Relief Programs

Several years ago the City enacted several programs to help low-income homeowners with their property tax bills.  There are two programs: a tax credit program and additional exemptions for elderly low-income homeowners.  Because these tax relief programs are income dependent, you need to file for them every year.  The filing deadline is September 30, 2010.  The updated forms, for FY 2011-2012, are now available on-line at the following links:

FY 2011 – 2012 Real Property Tax Credit Form:
http://www.honolulu.gov/budget/taxform2011trpt100.pdf

FY 2011 – 2012 Increased exemptions for low-income homeowners 75+:
https://www.realpropertyhonolulu.com/content/rpadcms/documents/exemption/bfsr pp4.pdf

Which Program?

Granted, it may be confusing trying to figure out which program you should apply for or if you should just apply for both.  Generally, if the titleholders own no other real property anywhere and the titleholders' income is less than $50,000, then you qualify for the tax credit.  The tax credit limits the tax liability of eligible properties to 4% (when the titleholders are under 75 years young) and 3% (for titleholders 75 or better).  

Eligibility for the increased exemptions is based on both household size and the income of all household members.  In general, you should consider applying only for the increased exemptions if you do not qualify for the Real Property Tax Credit program due to ownership of additional real property.  This is because the tax credit will limit your tax liability absolutely.  If you qualify for the tax credit, the increased exemptions will not provide you with any greater benefit.  

Discrepancies

Almost every year, when we remind homeowners of these programs, I am asked: "Why are there two programs if they're redundant?"  It should come as no surprise that taxes are inherently politically sensitive issues and elected officials tend to avoid taking any action which could be construed as increasing someone's taxes – even if that action would be of benefit to the vast majority of taxpayers.

Some of you may recall that last year I proposed several changes to the current property tax system which would have streamlined the assessment system, simplified the tax relief programs and most importantly provided direct savings to nearly 80% of our owner-occupants without creating an increased tax burden on non-owner occupied dwellings.

So why do we have two redundant property tax relief programs?  Because over the years various City Councils have approved all sorts of built-in relief programs which have yielded lots of publicity but, ultimately, have provided limited relief.  The most current example of this is the recently enacted "Homeowner" classification.  What was often ignored during the push to enact this legislation was the fact that the City already provides a means of recognizing owner-occupants and affording them a benefit through the standard exemptions.  The standard exemptions essentially create a de-facto "homeowner" classification.  So much time and effort has been placed in carving out exceptions for every facet of the population that the "big picture" has been virtually ignored.  At the end of the day we need to ask ourselves, "Have we really provided the owner-occupants with any greater relief?" 

The answer, I would say, is no. 

I certainly agree that a "Homeowner" classification can be an effective means of providing relief to our owner-occupants when it is a stand-alone mechanism.  Similarly, if the underlying objective for tax relief programs is to ensure that no individual will ever lose their home due to their property tax obligation then we only need to focus on their tax bill.  If we are going to give homeowners a break in their taxes it should be done simply- having four programs which return $25 apiece still amounts to $100 so why not just have one program that gives $100 back?  And if we eliminated three programs there'd be a savings which would allow us to return $120, for example.

Of course when you have four programs with titles like "Exemptions for Very Low-Income Senior Citizens" and "Homeowners Exemption" there is a reluctance to eliminate these programs because of the perception that something is being taken away.  For myself, I would rather hang my hat on a single program that saves the vast majority of our taxpayers the most money possible as opposed to a vast array of programs which saves most of our taxpayers some money.  Until that time, just remember to file all those property tax forms by September 30, 2010.  And, as always, if you have any questions, please feel free to contact my office at 768-5003.