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On our way to UBAE’s Kalihi bakeshop, my dad interrupted our daydreams about crinkle cookies and cheesecake with a controversial policy question, “What do you think about the lottery?”

Crammed into the backseat of the family Prius, my sister and brother-in-law looked at me questioningly. I grinned as my mom groaned.

Since receiving this year’s property tax assessment in December, my dad has decided a lottery is the best alternative to his impending property tax increase, and he’s taken to quizzing everyone on their stance – aggressively.

If you know my dad, you know that he doesn’t do anything aggressively and rarely takes up any political mantle, so his sudden interest in a revenue-generating lottery is telling. Like most Oahu homeowners who saw an average 13.3% increase in their property valuations, this recent assessment will add one more cost burden to the food, gas and electricity prices that are already stretching his fixed income. 

While state legislators may see this as a city problem, taxpayers don’t make those distinctions. In 2022, the state enjoyed a historic surplus and yet residents are seeing potential property tax increases of  in addition to the ongoing impact of this year’s 6.5% inflation that’s expected to rise again in 2023.

The usual finger-pointing between the state and counties will only make the situation worse. With , homeowners want solutions not excuses.

Hawaii is one of only five states that does not have any form of a lottery so creating one is an option. It’s a proven revenue-generator that the state could authorize to provide funds for county operations to offset any decrease in property tax collections.

However, , low-income earners buy a disproportionate share of tickets making the lottery a regressive revenue source. In full disclosure, my vote in my dad’s poll was in favor of the lottery with a purchase limit meant to blunt its negative impact.

But, that’s neither here nor there. We don’t need the lottery to relieve the property tax burden of homeowners.

Better Tools Needed

The City and County of Honolulu can act on its own.  that would simplify classifications to “owner-occupied” and “nonowner-occupied” as well as set up a four-tiered system to tax properties according to value is a good start.

These changes could provide the council members with better tools to both protect lower- or fixed-income homeowners residing in Hawaii while increasing rates on out-of-state (and in-state) investors at a time when .

Hawaii has the lowest residential property tax rates in the country, making it an attractive option for investors and second-home buyers. Of course, this drives up property prices and, as a result, property tax assessments.

According to , 39% of Hawaii’s residential units are not owner-occupied. If the city wants to generate more revenue from property taxes, that’s a better place to start. 

Correction: An earlier version of this column said 49% of Hawaii residences are not owner-occupied. The census actually puts it at 39%

Another option is to change the way the city conducts assessments. In 1978, via a ballot initiative to limit property taxes to 1% of the property’s value. The initiative also capped increases in value assessments to the lesser of 2% or inflation.

City lawmakers could enact similar limits, and like California, allow larger increases in valuation only at the point-of-sale, when the assessment would match the property’s actual purchase price.

And, while counties don’t typically welcome state interference, state lawmakers do have a few tools at their disposal. Property tax assessment growth limits can be imposed by the state while maintaining the counties’ rights to determine property tax rates.

This solution is my personal favorite because it would preserve counties’ abilities to raise revenue as needed, but any increase would come through a public vote by lawmakers rather than an unpredictable and seemingly less-transparent market-based assessment. 

The state could also provide incentives for counties who raise taxes on investors, lower taxes for owner-occupants or increase home exemptions by using transit accommodation tax revenues or block grants to offset revenue losses. In lieu of county action in the short-term, a portion of the budget surplus could go toward a one-time tax credit for low-income individuals and property owners over 65 on property taxes paid.

All this is to say that city and state lawmakers have many options for ensuring residents aren’t further stretched by exorbitant property tax increases.

Some options, particularly increasing taxes on investment properties, would take a lot of political will. But this is not an unsolvable problem. Despite my limited, theoretical support for my dad’s lottery push, I think we should try these changes first.