As the Hawai‘i State Association of Counties, we share many of the same goals in service to our constituents as the state legislature, including the pursuit of a fair and progressive tax structure that supports working families, addresses inequities, and curbs speculative investment in our real estate market.

While we agree that the current tax system needs review, we urge caution and collaboration to ensure that reforms achieve their intended goals without harming local residents or creating unintended consequences.

Tax System Overview

Hawai‘i’s tax structure is composed of various types of taxes that play unique roles in funding state and county services. Here is an overview from the Department of Taxation in 2021 of these taxes and their contributions:

• Income Taxes (20% of revenue): Income taxes are progressive, meaning higher earners pay a larger share. Over 90% of income taxes are paid by residents, making this tax relatively fair but heavily reliant on the local population.
• General Excise Tax (40% of revenue): The GET is applied to nearly all transactions in the state, effectively creating a cumulative tax rate of close to 11%. While only 70% of this tax is paid by residents, it is considered regressive because it disproportionately impacts lower-income households.
• Property Taxes (17% of revenue): Paid by landowners, property taxes represent a significant share of county revenue. Residents pay 70% of residential property taxes, while non-residents contribute 60% of non-residential property taxes. While it is often noted that Hawai‘i has the lowest property taxes in the country,  it is important to remember that services such as education, corrections and health care were centralized under the state to ensure greater equity across all four economically diverse counties and are not funded by property taxes as is the case in many other jurisdictions.
• Corporate Taxes (2% of revenue): While 60% of corporate taxes are paid by nonresidents, this tax represents a small portion of overall revenue.
• Other Taxes (21% of revenue): These include the transient accommodation tax  (primarily paid by visitors), the fuel tax (80% paid by residents), and other smaller revenue streams. The transient accommodations tax is a key tool for targeting nonresident contributions to Hawai‘i’s tax base.

This diverse mix of taxes reflects the state’s unique economy and population dynamics. However, it also underscores the need for careful coordination between state and county governments to ensure a balanced and equitable tax system.

Shared Vision, Complex Challenges

The counties understand the importance of addressing tax fairness, particularly with respect to property taxes. However, raising property tax rates is not a straightforward solution. From a legislative standpoint property taxes are a delicate tool to encourage certain land uses and behaviors that cannot be used as a broad sledgehammer.

Property taxes must be amended carefully to avoid inadvertently overburdening local families, our kūpuna on fixed incomes, many of whom are already struggling with Hawai‘i’s high cost of living, and to gain the public support needed to ensure passage.

Each county has a different mix of valuation processes, tax classes, exemptions, and circuit breakers. Recent efforts to reform property tax systems at the county level highlight the complexity of such initiatives. For example:

• Changes to Agricultural Tax Programs: These reforms were intended to ensure fairness, encourage local agriculture production, reduce speculation on agricultural land and prevent misuse of the agricultural tax benefit programs.  However, their implementation sparked significant public opposition due to the complexities of implementation and intentional misrepresentation by anti-tax special interests.
• Honolulu’s Empty Homes Tax Bill: This measure seeks to address housing affordability and reduce speculation in the housing market but faces challenges in defining and implementing a fair tax structure while minimizing negative impacts on residents.
• Using Taxes on investment properties for affordable housing and homelessness: Some of the counties already have programs for increased taxes on second homes and investment properties and have made a conscientious decision to not to rely solely on the state and federal funding to address homelessness. This tax class revenue to provide grants in aid, but in some cases these second homes are provided as rentals to local families and the increased tax burden has been shifted from the owner to the tenant through rents.

These examples demonstrate that while property tax reforms can address key issues, they require thoughtful design, stakeholder input, and rigorous implementation to succeed.

County Services Critical

County governments play a vital role in providing essential services that directly impact on residents’ daily lives. These include:

• Water, Wastewater, and Solid Waste Management: Ensuring access to clean drinking water, maintaining wastewater systems, and managing solid waste disposal and recycling programs.
• Mass Transit Systems: Providing affordable and accessible public transportation options to reduce traffic congestion and support mobility for residents and visitors.
• Transportation Infrastructure Maintenance: Building and maintaining roads, bridges, and other vital transportation networks to connect communities and support economic activity.
• Recreational Facilities: Managing parks, beaches, and recreational facilities that contribute to public health, quality of life, and tourism.

Counties are also tasked with emergency management, public safety, and environmental stewardship. These responsibilities require significant resources and careful planning to meet the needs of residents and maintain the quality of life that makes Hawai‘i special.

Need For Efficiency, Coordination

While counties are committed to delivering high-quality services, we also recognize the importance of spending wisely and operating efficiently. As stewards of public funds, counties continuously strive to improve service delivery, reduce waste, and prioritize projects that provide the greatest benefit to our communities.

To achieve these goals, counties must coordinate closely with the state to avoid duplication of services and ensure resources are used effectively. For example:

• Aligning transportation infrastructure projects to create seamless travel networks.
• Sharing data and resources to streamline waste management and recycling efforts.
• Coordinating emergency response systems to improve disaster preparedness and recovery.

This collaboration between state and county governments is essential to maximizing efficiency, reducing costs, and ensuring that all public services meet the needs of Hawai‘i’s residents.


Call For Partnership, Communication

The Hawai‘i State Association of Counties remains committed to working with the state Legislature to craft tax policies that serve all residents. We seek the opportunity to be active partners with the state legislature in discussions about tax policy reforms, ensuring that county perspectives are considered and that reforms align with shared goals.

As Rep. Chris Todd aptly stated in an article recently published in Civil Beat about the potential state plans, “We really need the state and counties to work in conjunction on these broader issues of tax equity.” Collaboration is essential to achieving the vision of a tax system that is fair, progressive, and supportive of Hawai‘i’s working families.

Together, we can address the challenges of Hawai‘i’s tax structure in a way that fosters equity, protects local families, and supports the long-term prosperity of our state. We look forward to working with the state Legislature in the spirit of partnership to build a stronger future for all Hawai‘i residents.

The Hawai‘i State Association of Counties is a nonprofit organization dedicated to fostering collaboration among our counties — Hawai‘i County, Maui County, Kaua‘i County and the City and County of Honolulu. Comprising members from the legislative councils of each county and the mayors as ex-officio participants, HSAC serves as a unified voice for county governments. Its mission includes improving county governance, coordinating programs, and providing a central source of information to state officials, legislators, and the public. More information, click here.