Love-Hate Relationship with Tourism
by Tom Yamachika, President Tax Foundation Hawaii
Here in Hawaii, we officially have a love-hate relationship with tourism.
How do we love it? Look no further than the Hawaii Tourism Authority. The HTA was established through legislation in 1998 (Act 156, Session Laws of Hawaii 1998). The preamble to that legislation recited that the visitor industry “accounts for almost twenty-five per cent of the gross state product and provides over thirty per cent of all civilian jobs. In light of the State's dependence on tourism, it is extremely important that the development, marketing, and research of this industry be coordinated in a manner consistent with the needs of the State.” As a result, HTA has been awarding lucrative marketing contracts – as Civil Beat reported, the marketing contract that the Hawaii Visitors and Convention Bureau had been working on was worth about $21.5 million a year, and it awarded (but later took back) a marketing contract to the Council for Native Hawaiian Advancement worth about $34 million in its first two years.
How do we hate it? We have been taxing the bejeebers out of tourists. Last year, for example, our Legislature, overriding Governor Ige’s veto of House Bill 862 (2021), stopped sharing Transient Accommodations Tax collections with the counties and instead authorized the counties to impose their own TAT on top of the 10.25% the State imposes. All of the counties quickly jumped on that bandwagon and imposed county TAT at 3.0%, the most allowed under the law. Now, tourists looking at their hotel folios are greeted with a state TAT of 10.25%, a county TAT of 3%, a state general excise tax of 4%, and, for most counties, a county surcharge on state tax of 0.5%. That’s a whopping combined tax rate of close to 18% under current law.
At the Legislature and our Executive Chambers, efforts to beat off the tourists with a stick continue. Several versions of the “Visitor Green Fee,” which we have complained about before, are still alive within the big square building. The bills would charge tourists $50 for a one-year license to visit our parks, beaches, and other natural attractions. The bills sponsored by the Governor’s Office, HB 1051 and SB 1349, are both dead for this session, but similar bills such as HB 1162 and SB 636 have passed the first round of committee hearings and are now awaiting attention by the legislature’s powerful money committees. HB 820 would have imposed an eye-popping 25% TAT rate (supposedly in lieu of the existing 10.25%, although the bill doesn’t really say that) on transient vacation rentals. After an hour of emotional testimony by scores of people on Friday, February 24, House Finance killed the bill. To me, it seemed remarkable that the bill even got all the way to a Finance hearing.
With all of these mixed messages going out to what is, happily or unhappily, our No. 1 economic driver, the possibility of economic waste looms large. What would you think if State Agency #1 dug up a pipeline on A Street and moved it to B Street, for beaucoup bucks, and then three months later State Agency #2 dug up the same pipeline on B Street and moved it back to A Street, again for mucho moola? Lots of money was spent, very little was accomplished. We may not all agree on the proper strategy for our tourism industry, but our leadership needs to decide on ONE direction and devote taxpayer resources to it. We can’t go along with different agencies or factions pushing in different directions, or (heaven forbid) fighting each other, with taxpayer funds.