Amendments offered for circuit breaker

The Maui County Council Budget and Finance Committee chairman has offered up some amendments to the circuit breaker property tax credit in an effort to bide time to collect more information to help “fine tune” changes made earlier this year that have drawn criticism.

Committee Chairman Mike White offered up four amendments to the program that was developed in the early 1990s to protect those with limited incomes, longtime residents and kupuna from escalating property assessments and property taxes.

The proposed changes were revealed in the agenda for the committee’s meeting in the Council Chambers beginning at 9 a.m. Tuesday and include:

* Allowing a member of the household to own vacant land that does not exceed $10,000 in value. The current rule does not allow a household member to own any property.

* Permitting an appeal for applicants who currently are receiving the benefits of the circuit breaker but do not qualify for the credit next fiscal year, which begins July 1.

* Extending the application deadline a month to Jan. 31 for the coming fiscal year.

* Calling for notification of the homeowner of a denial of the tax credit by March 1. The current provisions only say that a determination for the tax credit needs to be completed by April 30.

White said Friday that the amendments proposed are intended to provide time for the council to collect more information in an effort to fine-tune the changes, which were approved by the council in May after overriding a veto by Mayor Alan Arakawa.

He said that applications are “significantly behind the pace” of last year, which is the impetus for the extension of the application deadline.

The provision to “allow for an appeal under any circumstances” was offered to put applicants “in a holding pattern” so that the council can obtain more current information and go through the law early next year to “make whatever changes we feel are appropriate,” White said.

He pointed out that homeowners actually will not be making their first property tax payments under the new circuit breaker regime until August, giving the council time to fine-tune the provisions.

“If people are truly in a position where they cannot afford to pay the taxes, we don’t want them to be hurt by this,” White said.

On the flip side, he said that the committee’s approach has been “if you have the ability to pay, you should be paying.”

White led the effort to trim some of the loopholes that have allowed wealthy property owners to take advantage of the tax credit.

“The changes that we made simply limit access to the circuit breaker to those who most need it,” he said.

The council revised the way adjusted gross income was determined, adding the incomes of all titleholders and limiting the tax credit to those with combined incomes of $100,000 or less; capping the tax credit to homes with building values of no more than $400,000; and disqualifying applicants who own other properties.

The changes to the circuit breaker have faced opposition from the mayor, the group that originally led the fight to create the tax credit, and other members of the community.

In reacting to White’s proposed amendments, Arakawa said Friday that they “will not fix the problems the council has created.”

“I warned the council months ago when I vetoed the bill that this legislation would have serious impacts on those who could least afford to pay, but they didn’t listen,” the mayor said in an email. “Now, I’m warning them again that these proposals are still not going to work, because they do not address the most significant underlying flaws.”

He said the current circuit breaker rules are “very discriminatory against Hawaiians,” especially owners of kuleana, ceded and crown lands and multiple owners of land, who may be disqualified from the tax credit.

He said that the new circuit breaker rules hurt the elderly on fixed incomes who have made estate planning decisions. He noted previously that some families add a child to the deed, but the child’s income may push the family over the income limit.

“It’s absurd that they would sacrifice the many who can least afford to pay for the sake of catching a handful of cheaters,” the mayor said. “The cheaters won’t be affected by this anyway; they’re the ones that can actually afford to pay. We should be protecting those who need the help the most.”

William D. Tavares and John Blumer-Buell, co-chairmen of COMET (Committee for More Equitable Taxation), which led to the creation of the circuit breaker in the early 1990s, have called for the council to repeal the changes to the circuit breaker and reinstate the old provisions.

They said in a Nov. 27 Viewpoint in The Maui News that “it is preferable to help deserving residents and suffer some unintended beneficiaries.”

On the amendments proposed by White, Tavares and Blumer-Buell said Friday in an email that they support the extending of the application deadline, the appeal provision and the March 1 notification with a caveat that the latter proposed change could complicate financial planning.

Tavares and Blumer-Buell did not believe that the $10,000 land value limit “is realistic” given the current state of land values.

White defended the new circuit breaker provisions. As background, White noted that Maui County homeowners pay the lowest property tax rates and actual tax payments of all the counties in the state, and “we have the most generous circuit breaker.”

Under the rules for the two other Hawaii counties that have circuit breakers, Maui County residents who qualify for the tax break, would be paying twice as much as they are now. To qualify for the Oahu circuit breaker, the income limit is $50,000 gross income for all titleholders – half as much as Maui County’s – and homeowners cannot own a second property, White said.

In refuting other complaints, White said more than 80 percent of Maui County homes have building values of $400,000 or less. He added that some of those publicly complaining about the circuit breaker changes in The Maui News letters to the editor and in phone calls to his office actually live in million-dollar communities such as Honua Kai in Kaanapali and Kapalua.

“It’s not fair to say we’ve gutted the law,” said White, adding that the vast majority of the people currently in the circuit breaker program will be able to continue to take part.

* Lee Imada can be reached at