Oahu's new 'tourism tax' will affect residents, too

News Release From Grassroot Institute December 2, 2021

The Honolulu City Council on Wednesday approved Bill 40, which pending the mayor's signature, will establish a 3% transient accommodations tax for the City and County of Honolulu. 

The new tax will, in effect, be a surcharge to the state's 10.25% TAT. That means any visitor staying at a hotel or short-term vacation rental on Oahu will face a total tax of 13.25%. 

Kauai and Maui counties also have imposed the new surcharge, authorized by the 2021 state Legislature, and Hawaii County will be considering a bill to do so this coming Wednesday. 

Joe Kent, institute executive vice-president, warned the Honolulu County Council in testimony in October and again earlier this week that the effects of a TAT increase would impact not just tourists. Residents also use local transient accommodations, he said.

Moreover, it would further burden tourism, one of the state’s most vital industries, tourism, which was slammed by the coronavirus lockdowns and isn’t expected to fully recover for several years. Combined with the state and county general excise taxes that tourists also pay, the new tax will mean Hawaii has the highest tourism taxes in the nation. 

“High unemployment, regulatory uncertainty for businesses and continued confusion over the state’s destination-management strategy make this a bad time to add more taxes onto one of the state’s most valuable industries,” Kent said.

Adding insult to injury, one-third of revenues from the new tax will be dedicated to the county's over-budget and behind-schedule rail project, despite its history of fiscal mismanagement and lack of transparency. Moreover, projected revenues from the tax fall short of what the project needs to cover its budget shortfalls.

The bill’s fate is now in the hands of Honolulu Mayor Rick Blangiardi, who is expected to sign it.

>>> READ THE TESTIMONY <<<