A proposed constitutional amendment would let Hawaiʻi use property taxes to fund schools

Voters may get a chance to decide if the state should be allowed to use property taxes for public schools, a move that supporters say would get some of Hawaiʻi’s richest homeowners to better support a historically underfunded education system.

The Legislature is considering a proposed constitutional amendment on the issue. But opponents argue that the amendment’s language is misleading for voters and could discourage real estate investment in Hawaiʻi, pointing to failed attempts to pass a similar measure in 2018.

House Bill 1537 proposes a constitutional amendment that would empower the state to place a surcharge on residential investment properties valued at $3 million or more. Primary residences, as well as affordable housing, would be exempt from the tax.

In effect, the tax would target second properties under wealthy homeowners, many of whom live out-of-state, said Rep. Amy Perruso, who introduced the bill. The resulting revenue would fund all levels of public education, from prekindergarten to higher education, she added. 

The House Education Committee on Tuesday recommended that the bill be passed with amendments.

While HB 1537 has a good chance of making it through the Legislature, it will likely face significant opposition from real estate groups and Hawaiʻi’s five counties, said Colin Moore, a political scientist at the University of Hawaiʻi Manoa.

If the measure makes it onto the ballot, public opinion could be in the amendment’s favor, said Devin Thomas, a senior policy analyst at Hawaiʻi Appleseed.

“There does seem to be an increasing appetite across the state for assessing higher taxes on non-residents to compensate for years, decades of nonresidents coming in and being able to occupy the housing market,” Thomas said.

Powerful interests, like HSTA and the real estate industry, are invested in the amendment’s outcome and will likely shape public opinion around the ballot measure closer to November, Moore said.

“How voters interpret it, either as an additional tax or as necessary money to support education, will really decide its fate,” Moore said.