The Hawaii State Tax Watch Doggie is discussing a new Honolulu property tax proposal with his wife, the consummate researcher.
Q. I thought we had enough problems trying to tax the usage of real property. Now the City and County wants to tax people who don’t use their real property!
A. Do you mean the mayor’s proposed tax on unoccupied homes? The city of Vancouver in Canada imposes a “vacancy fee” on homes that are neither occupied nor rented. The tax there is 1% of the property’s assessed taxable value. The mayor’s proposal is based on that.
Q: You researched that already? How did you know I was thinking about it?
A: You’ve been snarling and growling about it for the past week.
Q: Oh. Hmm…so how does the city figure out if a home is vacant?
A: In Vancouver, questionnaires are sent to all property owners. These can be filled out either on paper or online. If a property hasn’t been occupied by the owner, the questionnaire then asks if it’s been rented or occupied by others, and if so, what are the names of the renters or occupiers; if the property has been undergoing renovation that makes occupancy impossible, and if so, what’s the building permit number; if the owners have been hospitalized or are in a long-term care facility, and if so, what’s the name of the facility; and if the owners can’t occupy the property because of a court order, and if so, what’s the case number.
Q: What’s to stop people from lying on their declarations to avoid the tax?
A: False declarations are perjury. Vancouver also provides for fines of up to $10,000 per day, in addition to payment of the tax, for a false declaration.
Q: The mayor says that the vacancy tax will result in more housing units being put on the market for rental, and additional monies collected that would help fund programs to help the homeless. What do you think about that?
A: In Vancouver, a news article from the Canadian Broadcasting Corporation noted that there was little change in the number of vacant homes, but the tax produced more money than expected.
Q: So, is that why Civil Beat’s recent editorial proposed a vacant home fee of 5% or 10% rather than the 1% that Vancouver is using?
A: They said that the “idea is sound, the amount woefully inadequate. A 5% or 10% vacancy tax would be more appropriate. That still might not be enough to change the behavior of many absentee landowners, but at least it would generate a sizable sum of revenue that could be dedicated to building affordable housing elsewhere.”
Q: The 1% was selected to be at about the difference between commercial and residential rates. In Honolulu, Residential A owners pay $4.50 per $1,000 of the first $1 million of value. Commercial property owners pay $12.40. One percent corresponds to $10 per $1,000.
A: If the vacant homes tax ends up to be 4% or 5%, people will be motivated to avoid the tax. Maybe they will try to get the property reclassified to commercial.
Q: Also, I have my doubts about whether any money taken in would go to affordable housing or homeless services. The City must fund the rail project and is going to have to find millions to pay for its operation and maintenance. It must plow hundreds of millions into capital improvements such as sewer system upgrades. The Mayor also has been talking about upgrades to the Blaisdell Center as well as establishing a transit plaza at Ala Moana Center.
A: That makes my shopping sound insignificant in comparison! I guess it’s okay for me to take it up a notch.
Q: (Whine) I didn’t see that one coming!
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Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.