County property tax policy should support locally owned and operated businesses, the same way they support local homeowners who live in their homes or who rent at defined affordable rates.
Though the below is written primarily for a Kaua‘i audience, the proposed tax policy strategies apply to all Counties.
The County Council’s review of the fiscal year 2023 budget is the most important task now facing them. While representing the priorities of Mayor Kawakami’s administration the Council has the full legal authority to amend the budget as they see fit, and to “make it their own”.
Historically, for better or worse, the Council has simply nibbled around the edges during the budget review, without making substantial amendments.
But they could. They could be bold. They could be innovative.
The Maui Council for example, has reduced funding slated for tourism support and moved those funds to a program that provides micro-grants to small local farmers. The Council also, during that same budget period significantly increased property taxes on Maui hotels and resorts.
The visitor industry screamed bloody murder and the small farmers said thank you.
Since then, no hotels have left Maui because the taxes are too high. Their beaches and roadways likewise remain crowded with visitors even though the County has reduced its marketing support.
We should do the same here on Kauai: Increase the property tax on hotels and resorts and on other foreign corporate entities who do business here, benefit from our natural environment, and utilize County services while exporting their profits to the continent or other foreign lands.
The property tax structure is a powerful public policy tool. It’s also the primary revenue producer for the County.
Owner-occupied homes pay the lowest property tax rate. In essence, the County protects and subsidizes owner-occupied properties shifting the property tax burden onto other classifications and uses. This is a basic example of utilizing tax policy to support a social objective, that benefits local residents.
In recent years our Council and Mayor have utilized this same public policy tool to incentivize affordable residential rentals. In essence, the owners of residential rental properties who change rents at defined affordable rates (and complete the necessary paperwork), also receive the lowest property tax rates.
The policy supports local families who live here and rewards property owners for renting to local residents at “below market” rates. Conversely, the policy shifts much of the cost of running the County to absentee investor owners who do not live here and who choose to maximize their profits by charging higher rents.
This public policy direction should be both applauded and expanded.
Why not have a similar property tax policy for businesses? A local restaurant or retail store, whose owners live here and who keep their profits here, should pay a lower tax rate than a corporate fast-food chain or big box store that has zero local ownership and who export their profits elsewhere.
Likewise, property owners who lease their commercial properties at affordable rates to aspiring local entrepreneurs should also be charged lower rates as an incentive and reward for helping to support small local businesses.
Ditto to agricultural lands. Small locally owned farms should pay much less than multinational corporate agribusiness.
And to those worried that these large companies will flee the islands due to our high property taxes, somehow I don’t think that is likely. To my knowledge, no hotel, no fast food store, no big box store, and certainly no GMO conglomerate has ever complained about our property taxes being too high.
It’s called a progressive tax policy. Those who have more, pay more.
We support and subsidize local homeownership and affordable residential rentals, why not do the same for locally owned small businesses?