One Third of Hawai`i’s Property Taxes Paid by Out-of-State Owners

A report released by The Department of Business, Economic Development and Tourism titled, “An Analysis of Real Property Tax in Hawai`i,” estimates that 32.3% of Hawai`i’s real property tax was paid by out-of-state owners in the 2016 fiscal year.

The analysis was based on the real property tax records obtained from all counties in the state.

DBEDT conducted the analysis at the request of the Hawai`i State Legislature.

“The report provides detailed information about property ownership and the contributions of real property tax by type of property and by residency of owners”, said DBEDT Director Luis P. Salaveria. “This study examines the correlation between real property tax and the other sectors in the economy such as government, finance, real estate investment, construction, housing demand, and tourism.”

Chief State Economist Dr. Eugene Tian explained, “It is a challenge to determine the location of residence for property owners, since this is not included in property tax records. Therefore, the analysis used tax notice mailing addresses as a proxy for the resident location of the property owner. However, mailing addresses provide an estimate rather than an exact measure because, in addition to including property owners, the mailing address may also include management companies, attorneys, accountants, or even friends and relatives. As a continuation of the study, DBEDT is planning to conduct a survey to identify the nature of the mailing addresses.”

The following is a brief summary of the analysis:

·         Hawai`i is one of 14 states in the United States where property taxes are not levied at the state level, but at county level only.

·         Nearly one-third (32.3%) of the property taxes were contributed by property owners residing out-of-state.

·         Growth of Hawai`i’s real property tax base (valuations) has been following economic conditions; the growth of the property tax base slowed when unemployment rates were high and vice versa.

·         Of the total number of properties (TMKs) in the state, the report estimated that 75.1% are Residential and Related; 15.8% are Agriculture, Conservation, and Preservation; 5.6% are Hotel/Resort and Tourism Related; and 3.5% are Commercial/Industrial and Public Service.

·         The estimates for property tax collection in the state showed that 53.2% of total property tax are collected from Residential and Related; 23.2% from Commercial/Industrial and Public Service; 18.2% from Hotel/Resort and Tourism Related; and 5.4% from Agriculture, Conservation, and Preservation.

·         For the state overall, it was estimated that 87.5% of the Residential & Related properties were owned or managed by Hawai`i residents or entities; 10.8% were owned or managed by U.S. mainland residents; 1.1% were owned or managed by foreign residents or entities; and 0.6% of the residential properties were jointly owned by Hawai`i and out-of-state residents.

·         For the Hotel/Resort and Tourism Related category, it was estimated that 59.1% were owned or managed by U.S. mainlanders; 31.8% by Hawai`i residents; 7.9% by foreign residents; and 1.2% were jointly owned between Hawai`i and non-Hawai`i residents.

·         For the Commercial/Industrial and Public Service category, it was estimated that 84.8% were owned or managed by Hawai`i residents; 12.3% by mainlanders; 0.3% by foreigners; and 2.6% were jointly owned by Hawai`i and out-of-state residents.

·         For the Agriculture, Conservation, and Preservation category, it was estimated that 59.8% were owned by Hawai`i residents or entities; 35.2% by mainlanders; 2.6% by foreigners; and 2.3% were jointly owned between Hawai`i and out-of-state residents.

·         Including all tax classes, it was estimated that Hawai`i residents contributed 67.8% of the total real property taxes collected; U.S. mainlanders contributed 29.9%; and foreigners contributed 2.4% of property tax collections.
·         For the Residential and Related category, Hawai`i residents contributed the majority at 76.55 of total real property tax collected; U.S. mainlanders contributed 21.1%; and foreigners 2.3% of property tax collections.

·         For the Hotel/Resort & Tourism Related category, U.S. mainlanders contributed over half of real property taxes paid at 52%; Hawai`i in-state contributed 42.8%; and foreigners contributed 5.3% of real property taxes paid.

·         For the Commercial/Industrial and Public Service category, Hawai`i residents contributed 68%; mainlanders contributed 31.9%; and foreigners contributed 0.2% of real property taxes paid.

·         For the Agriculture, Conservation, and Preservation category, Hawai`i residents contributed 64.3%; mainlanders contributed 33.3%; and foreigners contributed 2.4% of total property taxes paid.

·         The average effective rates for in-state-owners were 0.43% for the state overall; 0.38% for Honolulu County; 0.9% for Hawai`i County; 0.56% for Maui County; and 0.49% for Kaua`i County.

·         The average effective rates for out-of-state-owners were 0.83% for the state overall; 0.46% for Honolulu County; 2.22% for Hawai`i County; 1.05% for Maui County; and 1.01% for Kaua`i County.

Download the full report here.