Two bills designed to give more property tax relief to lower-income people and those on fixed incomes will be discussed at a City Council Budget Committee meeting at 9 a.m. tomorrow.The bills are designed to allow more owner-occupants to qualify for the low-income tax credit, also known as a "circuit breaker."

To qualify now, a family must make no more than $50,000 in total income. The tax credit is anything above 4 percent of total income.

For example, if a family earning $50,000 has a property tax bill of $3,000, it would get a $1,000 tax credit because its tax liability would be capped at $2,000 (4 percent of $50,000).

But if the same family owed only $1,500 in property tax, it would not get any tax credit because the maximum liability at that income level is $2,000.

If any title holder to a home is 75 or older, that household gets a more generous tax break, with its tax bill capped at 3 percent of total income.

For the 2009-2010 fiscal year, 1,939 families qualified for the tax credit, according to the Department of Budget and Fiscal Services. The program cost the city about $2.1 million in lost revenue.

The two bills before the council, Bill 09-75 and Bill 09-09, differ greatly in how the program would be expanded.

Bill 09-75 would eliminate the $50,000 income limit to qualify, making eligible any owner-occupant whose tax owed is a large percent of income.

The bill would in essence cap property taxes at 3 percent of total income for households earning $50,000 or less, and 4 percent for households earning more than $50,000.

Lowell Kalapa, president of the Tax Foundation of Hawaii, has testified in favor of opening up the program to households of all income levels, noting that many owner-occupants may live in what are now pricey homes despite having very limited incomes.

Bill 09-09 calls for keeping a $50,000 total income eligibility but would allow more people to get a tax credit by lowering the maximum tax owed.

The bill proposes capping the maximum tax owed at no more than 3 percent of total income.

The bill also proposes that senior citizens would pay no more than 2 percent of total income.

Mayor Mufi Hannemann last week signed Bill 09-51, which creates a new property tax category for owner-occupants. The expectation is the new owner-occupant category will have a lower rate than other categories, including nonowner-occupant resident properties, business and hotel/resort parcels.

Councilwoman Ann Kobayashi and others who voted against a new owner-occupant tax category said they prefer expanding the "circuit breaker" program as a preferred method of tax relief because only those least able to pay can benefit.

Kobayashi, a co-introducer of both 09-75 and 09-09, said she's not sure which version she likes better at this point and will wait to see what the effects are.

"Whatever helps the people who need the help," Kobayashi said.

She and council Chairman Todd Apo are considering an amendment to Bill 09-09 that would limit eligibility to families making no more than $70,000 a year. Kobayashi said she's also looking at eliminating disability benefits from counting toward qualifying income.

City finance officials have expressed concern with the timetable for the current low-income tax credit program and want to change it.

The deadline to apply for a tax credit is Sept. 30 of each year. Tax bills aren't mailed out until the following July, meaning people typically don't know in September if they will be eligible for a tax credit. In order to be more efficient and cut down on waste, city finance officials want to apply the credit earned to the following year's tax bill.