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Out-of-State Owner Contribute Up to One Third of Hawaii’s Property Taxes

The Department of Business, Economic Development and Tourism (DBEDT) today released a report titled, “An Analysis of Real Property Tax in Hawaii.”  The report estimates that 32.3 percent of Hawaii’s real property tax was paid by out-of-state owners in fiscal year 2016.

Click to read the report

The analysis is based on the real property tax records obtained from all four counties in the state. DBEDT conducted the analysis at the request of the Hawaii 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:

  • Hawaii 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 percent) of the property taxes were contributed by property owners residing out-of-state.
  • Growth of Hawaii’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 percent are Residential and Related; 15.8 percent are Agriculture, Conservation, and Preservation; 5.6 percent are Hotel/Resort and Tourism Related; and 3.5 percent are Commercial/Industrial and Public Service.
  • The estimates for property tax collection in the state showed that 53.2 percent of total property tax are collected from Residential and Related; 23.2 percent from Commercial/Industrial and Public Service; 18.2 percent from Hotel/Resort and Tourism Related; and 5.4 percent from Agriculture, Conservation, and Preservation.
  • For the state overall, it was estimated that 87.5 percent of the Residential & Related properties were owned or managed by Hawaii residents or entities; 10.8 percent were owned or managed by U.S. mainland residents; 1.1 percent were owned or managed by foreign residents or entities; and 0.6 percent of the residential properties were jointly owned by Hawaii and out-of-state residents.
  • For the Hotel/Resort and Tourism Related category, it was estimated that 59.1 percent were owned or managed by U.S. mainlanders; 31.8 percent by Hawaii residents; 7.9 percent by foreign residents; and 1.2 percent were jointly owned between Hawaii and non-Hawaii residents.
  • For the Commercial/Industrial and Public Service category, it was estimated that 84.8 percent were owned or managed by Hawaii residents; 12.3 percent by mainlanders; 0.3 percent by foreigners; and 2.6 percent were jointly owned by Hawaii and out-of-state residents.
  • For the Agriculture, Conservation, and Preservation category, it was estimated that 59.8 percent were owned by Hawaii residents or entities; 35.2 percent by mainlanders; 2.6 by foreigners; and 2.3 percent were jointly owned between Hawaii and out-of-state residents.
  • Including all tax classes, it was estimated that Hawaii residents contributed 67.8 percent of the total real property taxes collected; U.S. mainlanders contributed 29.9 percent; and foreigners contributed 2.4 percent of property tax collections.
  • For the Residential and Related category, Hawaii residents contributed the majority at 76.5 percent of total real property tax collected; U.S. mainlanders contributed 21.1 percent; and foreigners 2.3 percent of property tax collections.
  • For the Hotel/Resort & Tourism Related category, U.S. mainlanders contributed over half of real property taxes paid at 52.0 percent; Hawaii in-state contributed 42.8 percent; and foreigners contributed 5.3 percent of real property taxes paid.
  • For the Commercial/Industrial and Public Service category, Hawaii residents contributed 68 percent; mainlanders contributed 31.9 percent; and foreigners contributed 0.2 percent of real property taxes paid.
  • For the Agriculture, Conservation, and Preservation category, Hawaii residents contributed 64.3 percent; mainlanders contributed 33.3 percent; and foreigners contributed 2.4 percent of total property taxes paid.
  • The average effective rates for in-state-owners were 0.43 percent for the state overall; 0.38 percent for Honolulu County; 0.9 percent for Hawaii County; 0.56 percent for Maui County; and 0.49 percent for Kauai County.
  • The average effective rates for out-of-state-owners were 0.83 percent for the state overall; 0.46 percent for Honolulu County; 2.22 percent for Hawaii County; 1.05 percent for Maui County; and 1.01 percent for Kauai County.

The full report is available at: dbedt.hawaii.gov/economic.