HONOLULU – Hawaii’s hotel tax is likely to rise nearly 30% if law allows the four counties to increase the fee.
State lawmakers passed House Bill 862 to Governor David Ige. The bill eliminates the county’s annual share of $ 103 million in revenue from temporary lodging tax or hotel tax. Instead of sending the money to the counties, the state will keep it.
In order to compensate for the loss of income for the four districts, each district can increase its hotel tax from the current 10.25% to 13.25% for up to 10 years. Counties would be ahead in terms of revenue if legislation became law.
Ige has until June 21st to veto the bill.
Tourism and government officials are debating whether the revenue from a 30% TAT increase would offset the potential negative effects of an increase in the cost of a Hawaiian vacation, especially now as the state tries to recover from the pandemic.
“If the four counties passed the tax increase, Hawaii would be the state with the highest lodging taxes in the nation, which would undoubtedly affect our competitiveness,” said Mufi Hannemann, president and CEO of the Hawaii Lodging & Tourism Association.
“Economically, we are far from returning to any kind of normalcy,” said Hannemann. “Now is not the time to keep taxing Hawaii’s largest job provider if problems persist, as demonstrated by the nation’s highest unemployment rate. The government didn’t do it after 9/11. Why should you choose this path now? “
Millions of dollars are at stake on both sides.
In fiscal 2019, the state’s lodging tax grossed $ 631 million. Kauai County received 14.5% or $ 14.9 million of the $ 103 million distribution to counties; Hawaii County received 18.6%, or $ 19.2 million; Honolulu County received 44.1%, or $ 45.5 million; and Maui County received 22.8%, or $ 23.5 million.
State Department of Taxation director Issac Choy said Friday that if the counties implemented the 30% TAT increase, “they would outperform the $ 103 million allocation.”
According to the tax bureau, the counties would conservatively raise $ 108.8 million in the first year of the increase. In the second year, they would receive $ 138.7 million, and collections would take off from there.
The state Treasury estimates that Honolulu and Maui are expected to make up for the loss of their TAT stake in the first year, but it would take Kauai and Hawaii Island more than three years to hit the 2019 payout.
Tourism has recovered over the spring break and is expected to see further growth this summer. However, it was still a few years ago fully recovered.
Keith Vieira, principal of KV & Associates, Hospitality Consulting, said the potential TAT hike was on top of general excise taxes and other expenses like COVID-19 travel tests, which often cost $ 150 to $ 300 each. Vieira said the cost of doing business has increased and companies have already increased prices to stay open.
“We are coming out of the worst time we’ve ever had and due to a lack of legislative creativity and in some cases greed, we are putting our industry at risk,” said Vieira. “I can’t believe they did this through gut-and-replace and didn’t allow any discussion.”
According to Vieira, the proposed increase means visitors would pay more than 18% of GET and TAT taxes per night on their hotel rooms and resort fees.
“We’re 90% to 95% vacation destination, so visitors can’t pass these costs on to businesses,” he said. “At some point they will go somewhere else.”
State lawmakers said the cut in county’s distribution was aimed at accountability.
Home Finance Chair Sylvia Luke (D-Oahu) said during an HB 862 conference on April 22nd, “This will encourage counties to make (bed and breakfast homes) more accountable and enforce (rules for bed and breakfast). Breakfast houses).
“It also provides the counties with a different tax authority than just property tax and some of the vehicle fees,” Luke said.
Rep. Richard Onishi (D-South Hilo, Keaau, Honuapo), chairman of the House’s Labor and Tourism Committee, said he was in support of ending TAT distributions in the county because he was unsatisfied with accounting for previous TAT expenses be.
Maui Mayor Mike Victorino is the only mayor to publicly announce his intention to increase the county’s temporary housing tax from 10.25% to 13.25%.
Victorino’s spokesman Brian Perry said Monday it was premature to discuss details.
“Mayor Victorino will clarify his intentions on this legislation at a time when it becomes law,” Perry said.
Cyrus Johnasen, spokesman for Hawaii Mayor Mitch Roth, said, “Our government intends to ask the governor to veto HB 862.”
“We believe the increasing TAT collection will continue to weigh on an already fragile hotel industry that employs large numbers of our residents,” said Johnasen. “Additionally, we believe the bill would affect not only tourism for Malihini, but also the ability of our local families to stay – something we do a lot here in Hawaii.”
Kauai Mayor Derek Kawakami did not definitively respond to the legislation, but said, “The bottom line is that the county needs TAT revenue to balance our budget and provide vital services to our residents and visitors such as the police, fire department and ocean rescue.
“We look forward to working with our state and county partners to find out how best our county can receive our share of TAT.”
Honolulu Mayor Rick Blangiardi did not respond to the Honolulu star advertiser’s request for comment.