In 1963, the Legislature in Hawaii passed the Pittsburgh Tax Plan which changed
ID: 1120133 • Letter: I
Question
In 1963, the Legislature in Hawaii passed the Pittsburgh Tax Plan which changed property tax rates from a single rate levied on property values to a split-rate system in which land and improvements are taxed at different rates. As a result of the law, land in Honolulu was taxed at $15 per $1000 of assessed value and improvements were taxed at substantially less.
a) Suppose there are four major political interests in Hawaii: hotel, agriculture, small business and residents. Which of these (if any) is most likely to have opposed the Pittsburgh Tax Plan? Why? (Be careful to answer the question asked. Do not answer the question: ‘which is most likely to oppose taxation in general?’)
b) The Halekulani is a low-rise, low-density luxury hotel in Waikiki. The SheratonWaikiki is a high-rise, high-density luxury hotel in Waikiki. Which hotel had the higher tax bill under the Pittsburgh law? Which hotel had the higher claim on public services? Do you think these two facts created support for or opposition to the Pittsburgh law?
Explanation / Answer
Ansa) Agriculture is most likely to have opposed the Pittsburgh Tax Plan because in agriculture all the property is just land which will be taxed at higher rates. For other businesses: hotel, small business and residents , a large proportion of the value of property is the structure over land which under the plan would be taxed at lower rate.
Ansb) The low-rise, low density luxury hotel would have had higher tax bill per unit of property because it occupies much more land than Sheraton Waikiki. In general, everybody has equal claim on public services as it is not a function of tax paid. These two factors would have meant that low-rise, low-density luxury hotel in Waikiki would have vehemently opposed the Pittsburgh law.