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Bill would let isle voters decide on investment-property tax for schools

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Hawaii voters would be asked to decide whether the state should tax “investment real property” to support public education, under a proposal that lawmakers advanced Wednesday.

The House Education Committee voted 11-0 in favor of Senate Bill 2922, which calls for a constitutional amendment allowing the state to establish an unspecified “surcharge” on investment properties to benefit public schools. An amendment is needed because the state Constitution gives counties the exclusive power to levy property taxes.

The committee made significant changes to the bill, including removing language that also would have imposed a surcharge on visitor accommodations.

A previous draft specified that the property tax surcharge would apply only to second homes valued at $1 million or more; that detail has been removed. Lawmakers also removed language prescribing exactly how the collected revenue could be spent.

Under the revised bill, the ballot question would be: “Shall the Legislature be authorized to establish, as provided by law, a surcharge on investment real property to be used to support public education?”

Some lawmakers questioned whether the proposal is now too broad. Last year, a similar attempt failed late in the session as lawmakers tussled over details of tax rates and exemptions and how the surcharge would be implemented.

House Education Chairman Justin Woodson said he believed the previous version of the bill would have opened the state up to legal challenges.

Woodson (D, Kahului- Wailuku-Puunene) noted there is pending litigation against the city over its Residential A property tax class, which taxes nonowner-occupied homes at higher rates for homes valued at $1 million or more. The plaintiffs argue the classification discriminates against nonresidents.

Woodson said he chose to remove the surcharge on visitor accommodations — which the hotel and tourism industry strongly opposed — from the bill because the state already has authority over the transient accommodations tax and how it is spent.

“The beauty of enabling a question on the ballot is that everyone, as long as you’re a voter, has the opportunity to express their opinions,” Woodson said after the committee hearing. “What we tried to do is just to make the question very clean, concise and clear: Do you want to allow for additional funding to go toward our public education, taken from investment properties?”

He said if the constitutional amendment were to pass, the Legislature would then be charged with coming up with the implementing legislation, including definitions and tax rates, to carry out the amendment.

“Ultimately it’s a discussion, a very serious discussion, about if we’re going to provide additional funding for our kids,” Woodson said.

Corey Rosenlee, president of the Hawaii State Teachers Association, which has lobbied hard for the bill, said he was encouraged that the bill moved another step forward.

“We’re hopefully optimistic that this is going to pass the Legislature, and that for the first time the people of Hawaii are going to have a chance to vote on whether they want to properly fund Hawaii’s public schools,” Rosenlee said.

He said that although the proposed ballot question has been changed to remove the reference to second homes valued at $1 million or more, lawmakers’ intent has been documented throughout the process.

“The intent of both the HSTA and the Legislature has been very clear, that we’re going after these high-end, second homes — residential investment properties,” Rosenlee said.

He added that studies have shown that “funding our schools does increase student achievement, especially when it comes to low-income students.”

“If we have to increase funds, where should it come from? Hawaii is the only state in the entire country that does not use property taxes to fund its schools and we also have the lowest property tax rate in the entire country,” Rosenlee said.

The bill must be approved by a two-thirds vote in the House. If the Senate agrees to the amended bill — which the Senate previously passed on a 24-1 vote — the question would go on the general election ballot. The governor does not have the power to veto proposed constitutional amendments.

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