HONOLULU -- Opening arguments were held Monday in a lawsuit in state court challenging a big tax break given to families on Hawaiian homelands.

Critics of the homeland tax break said it means non-Hawaiian taxpayers are subsiding city services for homesteaders.

Attorneys who have challenged Hawaiian programs before have now seized on county property tax rates. In Honolulu for example, people who own homes in homelands subdivisions pay $100 a year in property taxes.

Most Hawaiian families on homestead land are now living in typical suburban houses to which the counties provide services like trash pick-up, police and fire protection and parks services. An average homeowner pays about $1,800 a year in property tax.

Attorney Bill Burgess says that race discrimination and unfair.

"It's more than subsidizing. It's giving them a free ride," Burgess said.

The homelands tax breaks have been in place for many years. It is based on the fact that homesteaders cannot resell their land and face other controls and rules.

"It would seem to be unfair to apply the same tax to these property owners who have severe restrictions to the properties that others don't," Deputy Attorney General Girard Lau said.

In court on Monday, the attorney for homeowners like Ewa Beach's Earl Arakaki, argued that during the years of appeals ahead all non-homesteaders should pay the same tax as homesteaders, which the counties said would bankrupt them.

"That amounts to one-third of our budget," Hawaii County attorney Craig Masuda said.

If it were found illegal, the counties would be more likely to apply regular taxes to homesteaders.

"I think that especially in this economy, it is an extremely unfair sucker punch to those Hawaiian homesteaders," Maui County attorney Richard Ross said.

Judge Gary Chang ruled that the tax break has a rational basis and rejected any immediate change in rates for anybody.

"The burden would be enormous upon the counties," Chang said.

Critics of the homestead tax rates said they expected to lose at this stage, but expect to have the special rate declared unconstitutional even if they have to go to the U.S. Supreme Court.