All’s not well in paradise — if you have a timeshare

“No man’s life, liberty or property are safe while the Legislature is in session…” – Gideon J. Tucker, 1866

The people of the United States are protected from errant government by the Constitution; this works only when government obeys the Constitution.  

Errant government can destroy; for example, Maui County, State of Hawaii. Its legislature is using the power to tax to profit and to destroy.

“That the power of taxing … may be exercised so as to destroy (the taxed)… (it) is too obvious to be denied” – Chief Justice of the United States John Marshall in McCulloch v. Maryland (1819)

{mosads}Daniel Webster — congressman, U.S. Senator, twice secretary of State and presidential candidate argued in that case, “An unlimited power to tax involves, necessarily, a power to destroy.” Those words are rattling around today in Hawaii’s County of Maui.

Maui County’s Council has nine elected people. It is responsible for local law enforcement (160 officers) and infrastructure such as roads, etc. for its 165,000 people. Not schools.

The Council has driven most of Maui’s good paying jobs away. The last Maui sugar cane refinery, for example, closed in 2016, leaving a 4 percent sales tax, property taxes and a share of state-collected tourism taxes as the last substantive sources of revenue.

By law, the County cannot apply a transient tax as do most other U.S. jurisdictions on hotels and rental cars; the State has exclusive tourism taxing power.

Maui’s property taxes are its main source of revenue. Maui is an ultra-high property value area. Non-local owners of oceanfront properties can afford the tax; and, they make nice deductions on federal income tax forms. But locals are a different story.

Maui per capita income is $29,499 (including adults and children); median family income is $64,567. Everyone pays property taxes directly or through rent.

Out-of-towners with deep pockets are prime revenue producers for Maui. Those that don’t have permanent homes on Maui stay in expensive hotels, short-term-rentals and in recent years, timeshare units.

Timeshares are unique. They are units sold to people who buy one-52nd or more of a unit that is used like a hotel room. The property taxes are paid by the individual owners.

When timeshares first came to Maui, the County taxed them as residential condominiums, between two and three percent. Hotel owners and their unions complained about those low taxes while hotels were paying nine percent.

The County raised the timeshare rates to the hotel rate and defended the raise in court. Their argument essentially was that timeshares act like hotels, look like hotels and are subject by state law to transient taxes like hotels, thus, they should be charged property taxes like hotels.  The Hawaii State Supreme Court agreed.

After tripling the time-share property taxes from residential rate to hotel rate, Maui legislators decided that wasn’t enough; it began discussions to raise the timeshare property tax from 9 percent to 21 percent. Why? Timeshares were “costing” Maui County money — they believed that. It then legislated the property tax to a “reasonable” 14 percent, more than 50 percent higher than hotels, and more than 400 percent higher than timeshares used to be taxed at — residential condo rates.

Former Maui County Councilmember Don Couch told this writer why: Because they could. They had, in his words, “The power to tax…” They had it, so they used it. He didn’t fully quote Daniel Webster’s: The power to tax is the “…Power to destroy.”

Back into court. Timeshare owners claim their “equal protection” and “due process” 14th Amendment constitutional rights were violated by the Maui council. The owners have won every court motion over the history of the case topped off by the Maui court ordering the County to reimburse more than 10 million dollars it collected irregularly, in the court’s view. They just might be right.

Unlike their previous arguments in court, Maui’s lawyers now argue that they can charge any time-share property rates they wish. Though the legal definitions of hotels are identical to the definitions of timeshares, the council added words “timeshare plan” to the definition of uses in order to segregate timeshares into a different legal tax classification.

Timeshares are in fact “hotels” in every sense of the word. They charge like hotels, they tax like hotels, their restaurants feed you like hotels, their bars serve drinks like hotels; their beaches are exactly like those of hotels.

Maui county, the council claims, loses revenue on time-share people because they can cook their own food and do their own laundry.

Making matters worse for the County’s rationale for higher taxes on timeshares, the Council commissioned an outside study to support raising timeshare taxes to the highest level in the United States. The Council wanted the study to show deleterious county revenue effects of timeshares. It didn’t.

Ignoring the results of its own study, the Council raised the tax rate forcing timeshare owners to pay millions more in taxes. Did it do so legally? Not so much.

Claiming a “compelling public interest” to support the tax spike to a judge did not work. The judge rejected the tried and true rationale for raising taxes every government agency uses. The Council and its lawyers couldn’t explain a “compelling public interest” to a judge. It was a sheer money grab.

Maui’s lesson: people who are taxed and can’t vote can’t punish their taxers. In Maui County, “No man’s life, liberty or property are safe while the (Maui County) Legislature is in session…”

American civilization is built on the U.S. Constitution; and fairness and equal treatment of all. The United States Supreme Court has so declared for over 198 years.

Maui’s runaway government is being challenged by Americans in the Maui court house. Can Maui’s government violate the constitutional rights of Americans willy-nilly because it has the “power to tax?” No.

Raoul Lowery Contreras is the author of “The Armenian Lobby & American Foreign Policy”and “The Mexican Border: Immigration, War and a Trillion Dollars in Trade.” His work has appeared in the New American News Service of the New York Times Syndicate.