Maui leads offensive for counties to increase their TAT surcharges

from Grassroot Institute of Hawaii, August 1, 2023

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Maui County Council Committee on Government Relations, Ethics and Transparency on Aug. 1, 2023.
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August 1, 2023
1:30 p.m.
Maui County Council Chamber

To: Maui County Council – Government Relations, Ethics, and Transparency Committee
      Nohelani U‘u-Hodgins, Chair
      Tamara Paltin, Vice Chair

From: Grassroot Institute of Hawaii
           Joe Kent, Executive Vice President

RE: Resolution 23-174 & 23-171 — Relating to approving for inclusion in the 2024 Hawaii State Association of Counties [and 2024 Maui County Council] legislative package a state bill relating to the county transient accommodations tax.

Comments Only

Dear Chair and Committee Members:

The Grassroot Institute of Hawaii would like to offer its comments on Resolutions 23-174 and 23-171, which seek to approve the inclusion of a bill in the legislative packages of the Association of Counties and Maui County Council that would eliminate the limit for a county-level transient accommodations tax.

We have grave concerns about what is clearly a bid to increase the county TAT rate. When the state eliminated the county share of the TAT, it was understandable that counties would seek to replace the lost revenues. However, that issue was addressed when legislators created the county level TAT, giving counties the ability to charge a separate TAT with a maximum rate of 3%.

The result, unfortunately, was that Hawaii now has some of the highest tourism taxes in the world,[1] and combined with the state and county general excise taxes, this has become an increasing burden on local businesses.

Hawaii already has one of the highest tax burdens in the nation,[2] which contributes to our high cost of living and the continuing exodus of residents who no longer can afford to live here.

The last thing our economy needs at this point is more taxes.

Some people argue that the TAT applies to only tourists. But tourists are not the only ones who pay the TAT. For example, neighbor island residents who stay on Oahu for medical care, or families in need of a temporary dwelling after a natural disaster, must book either a hotel or a short-term rental. Likewise, medical professionals from the mainland must rent lodgings somewhere while practicing in Hawaii.

Then there are residents who want to visit family on other islands or enjoy a “staycation.” A TAT increase will make it more expensive for residents to travel within the state, whether for business, pleasure or medical necessity.

The state TAT started out in 1987 at 5% and was supposed to be only temporary.[3] Now, it’s 10.25% at the state level and all the counties have added 3% surcharges. It has become a way to increase revenues, regardless of the cost to the economy or the strain it might put on local businesses.

I said it earlier and I’ll say it again: Given the state of the economy and the lack of growth in tourism spending, this is not the time to raise taxes. Hawaii’s businesses and residents could use a break from new tax hikes, surcharges and fees.

Thank you for the opportunity to testify.

Sincerely,

Joe Kent
Executive Vice President
Grassroot Institute of Hawaii
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[1] Alison Fox, “These Cities — Including 3 in the U.S. — Have the Most Expensive Tourist Taxes in the World, Study Shows,” Travel + Leisure, Aug. 12, 2022.
[2] Jared Walczak and Erica York, “State and Local Tax Burdens, Calendar Year 2022,” Tax Foundation, April 7, 2022.
[3] Lowell Kalapa, “Jerking The Hotel Industry Around, You Can’t Trust Lawmakers,” Tax Foundation of Hawaii, Feb. 17, 2013.