On the heels of the governor and the legislature collecting the counties’ share of a tax on hotels and short-term rentals, the district council members will discuss the imposition of their own next week.
Bill 81, slated for Tuesday’s finance committee agenda, would impose an additional 3% local tax on top of the current 10.25% state temporary lodging tax.
The legislature paved the way for the additional accommodation tax in a Gut-and-Replace-Law passed at the beginning of this year without public contribution. HB 862 withdrew its share from the counties and gave it to the state, while the counties were able to enforce their own local option tax of up to 3% for up to 10 years.
Kauai and Maui have already enforced the tax in full; Honolulu City Council recently tabled its bill in first reading 7-2 in favor.
If all counties pass the measure, the resulting 13.25% tax will make Hawaii the state with the highest lodging tax in the country, said Mufi Hannemann, president and CEO of the Hawaii Lodging & Tourism Association. Hannemann warned that the additional tax could affect the state’s competitiveness in the tourism market.
The tax applies to hotel rooms and rentals of less than 180 days.
Island of Hawaii tourism officials were unavailable for comment by Tuesday’s press deadline, but are expected to oppose the measure.
Heather Kimball, Hamakua councilor, sponsor of the county’s Bill 81 law, said imposing the additional TAT was the fairest way to offset the $ 19 million the county had lost to state action. She does not want residents and property owners to have to pay the bill through increased property taxes.
She said she spoke out against the state’s measure, but now that it’s passed the county needs to do something.
“There’s a budget gap of $ 19 million that I can’t fill any other way,” said Kimball. “We have a big budget gap and I don’t know of any other way of filling it.”
The TAT was originally passed by the state legislature in 1986 to generate revenue for counties to offset the impact of visitor activity on county infrastructure and services. In the course of time, the proportion of the rural districts was diluted by additional funds commitments for certain projects, so that the proportion of the rural districts became smaller and smaller. This share was completely discontinued this year.
Kimball said Treasury officials estimate the proposed tax will bring the county back to its $ 19 million annual rate within three years.
“We’re the last to submit a bill,” said Kimball.