Hawaii's hotel tax could increase by nearly 30% if House Bill 862 (HB 862) is passed, allowing the state's four counties to increase fees and possibly weaken the state's hotel industry.
HB 862, which has been sent to Gov. David Ige, proposes removing the four counties' annual share of $103 million in revenue from the transient accommodations tax (TAT), instead allowing the state to keep the money rather than distributing it to the counties.
“If the four counties were to enact (the tax increase), it would make Hawaii the state with the highest lodging taxes in the nation, which will undoubtedly affect our ability to compete,” Mufi Hannemann, president and CEO of the Hawaii Lodging & Tourism Association told the Honolulu Star-Advertiser, as reported by West Hawaii Today.
Tourism and government officials have been discussing if the revenue generated by a 30% increase in the TAT outweighs the potential negative effects of increasing the cost of a Hawaii vacation, particularly during a time when the state is still recovering from the pandemic's impact.
“Economically, we are far from being back to any kind of normalcy,” Hannemann told the Honolulu Star-Advertiser. “Now is not the time to further tax Hawaii’s greatest provider of jobs when it is still struggling as evidenced by the highest unemployment rate in the nation. Government didn’t do it in the aftermath of 9/11. Why would they choose this path now?”
Keith Vieira, principal of KV & Associates and Hospitality Consulting, explained that the potential TAT increase would be in addition to general excise taxes and other fees such as COVID-19 travel tests, which typically cost between $150 and $300 per test. Additionally, Vieira reported that the cost of doing business in the state has increased and businesses have already raised prices to stay financially stable.
“We are coming out of the worst time we ever had and due to lack of legislative creativity and in some cases greed, we are putting our industry at risk,” Vieira told the Honolulu Star-Advertiser. “I can’t believe that they did this through gut-and-replace and didn’t allow for any discussion.”
The Hawaii Tourism Authority reported that tourism dollars generated from TAT, which visitors pay when they stay in legal accommodations, aided in funding nonprofits, festivals and events across the state in 2019.
Visitors to the Hawaiian Islands reportedly spent $17.75 billion in 2019, a 1.4% increase from the previous year, according to data from the Hawaii Tourism Authority.
Additionally, the Hawaii Tourism Authority reported that tourism revenue had generated $2.07 billion in state tax revenue in 2019.