Hawaii committee to discuss $25 tourism tax Friday

by Merrilee Gasser, The Center Square, February 22, 2024

(The Center Square) - Tourists to Hawaii could pay an additional climate tax under a proposed bill scheduled for a hearing on Friday.

House Bill 2406 would impose a $25 "transient accommodation tax," also known as a TAT, on top of the 10.25% TAT that is already in place and would apply to each booking for an accommodation.

The money collected through the new climate tax would be put into a Climate Health and Environmental Action Special Fund, where the money would be used to "minimize the impacts of, and respond to, climate crises," according to Gov. Josh Green, who has voiced his support for the measure.

"The costs of combating climate change are immense. However, the cost of not taking immediate action will be far greater on our environment, agriculture, property, human health, and our State. H.B. No. 2406 advances efforts to prevent climate crises and more effectively respond to these crises when they occur," the governor said in written testimony.

The bill would provide an exemption to the climate tax if the accommodations were being used to provide emergency housing to people displaced as a result of a state of emergency or state disaster, according to the bill's text.

Opponents say the new tax could harm the competitiveness of Hawaii's tourism industry.

"Increasing tourism taxes decreases the number of visitors. Moreover, policymakers cannot assume that tourism taxes will not have an additional effect on visitor spending," said Ted Kefalas, Director of Strategic Campaigns for the Grassroot Institute of Hawaii. "It is only common sense to assume that tourists will compensate for higher tourism taxes by adjusting their budgets and spending less on dining, activities or shopping."

Kefalas also said the bill falsely assumes that the tax would fall exclusively on tourists.

"The TAT also directly affects Hawaii residents who need to stay in local transient accommodations when traveling interisland or simply seeking to enjoy a staycation," said Kefalas.

The Hawaii Tourism Authority said it agrees with the intent of the proposed legislation.

"There are several proposals before the Legislature this session for a green fee or tax, and we are continuing to solicit feedback and examine which model makes the most sense for the industry and for the traveling public," writes the Hawaii Tourism Authority. "Whichever model this Legislature decides upon to facilitate visitor contributions to the care of our natural resources, we advocate the timely, transparent, and tangible reinvestment of those collections into our natural environment – the more direct the better."

The Department of Taxation has proposed changes to the bill that would allocate a set dollar amount or percentage of total TAT revenues to the climate health and environmental action special fund.

Lawmakers on the House Committee on Finance are scheduled to consider the bill Friday. The House Energy and Environmental Protection Committee approved the bill earlier this month.