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Hawaii Floats Another Real Estate Tax

1 min readBy: Joseph Bishop-Henchman

I guess real estate must be booming in Hawaii as officials there are looking to levy more taxes on it:

The Hawaii State Legislature has turned to the real estate industry in its search for additional revenue, proposing to levy a special 1 percent general excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. on businesses that sell real property.

The proposed taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. , which would take effect July 1 and sunset after five years, would be on the gross proceeds of a sale, minus a real estate salesperson’s commission and conveyance tax, and would apply to both commercial and residential properties.[…]

Real estate transactions currently are taxed by the state through the conveyance tax, which already has been used as a source of extra revenue.

Lawmakers last year took a three-tiered tax on real estate conveyances that stopped at 30 cents per $100 for purchases of $1 million or more and created a seven-tiered system that tops out at $1 for every $100 of purchases of $10 million and above for commercial properties.

I’m not sure what policy justification there is to soak real estate conveyances in such a way. Our friend Lowell Kalapa of the (unrelated but usually spot on) Tax Foundation of Hawaii had this to say:

Inasmuch as this bill probably is aimed at large landowners/developers, the cost of the tax will exacerbate what is already a very expensive market for real estate.

In addition, if this measure is adopted, it may open the door for other general excise tax impositions and additional rates which may result in a convoluted general excise tax system.

More on Hawaii here.