If tourists pay a transient accommodations tax, shouldn’t the level of government that handles most of the facilities and services designed for and used by visitors get its fair share of that revenue?
Determining the distribution of the transient accommodations tax, or TAT, between the state and four counties has been an ongoing debate at the state Legislature for the past several years, including a current bill before state lawmakers this legislative session.
Tourists who stay in Hawaii pay 13.25 percent in taxes on their hotel rooms (9.25 percent for TAT and 4 percent for GET).
Of the total amount, almost 11 percent goes to the state and only 2.25 percent goes to the four counties of Honolulu, Hawaii, Maui and Kauai.
But the problem in the distribution between the state and four counties lies within the fact that our visitor industry heavily relies on the counties to maintain ocean safety, beaches and parks, public safety, public transportation and the overall maintenance of our islands’ natural beauty. The costs of those amenities to the county of Kauai, as well as combined costs for fire and police protection, have increased substantially over recent years.
With the TAT shortfall, some counties unfortunately have already been forced to raise property tax rates. In Fiscal Year 2014-15, Kauai County increased real property taxes in the residential, vacation rental, hotel and resort, commercial and industrial tax classifications to address the shortfall. This has been burdensome for our taxpayers, who have also been faced with an increased cost of living and other service fees. Why should our residents have to bear the brunt of these expenses?
That is why we have been fighting to ensure that the counties receive their fair share of the TAT revenue.
The argument for a greater funding share for the counties is justified: During the recent economic downturn, the state took the counties’ share of TAT revenue to balance the state budget.
At the same time, the state placed a cap on the counties’ share of the TAT revenue. So while the TAT distribution to the state since 2007 increased by $198 million, the counties have only collectively received an additional $2.2 million.
Because of this unfair distribution, the counties have annually lost $85 million. In addition, a working study group on the TAT revenue distribution in 2015 recommended that the Legislature provide a more equitable allocation between the state and counties; such as a 55 percent to 45 percent split. The Legislature has ignored the working group’s recommendation.
To make up for any shortfall in the TAT, state legislators sometimes ask why county leaders are hesitant to raise the General Excise Tax (GET). It’s simple. Implementing a GET surcharge to the cost of all goods and services in addition to regular sales tax means that the additional tax would be paid for by you, the consumer. Raising the GET would unfairly burden our Hawaii residents since most of the GET revenue is already generated by local residents, not tourists.
With the TAT being generated by tourists, providing a fair share of that respective tax revenue to the counties would benefit all, including both our local taxpayers as well as those visiting here.
With the legislative session quickly coming to an end, we remain hopeful that our representatives at the state will provide a fair distribution of the TAT.
This column was written by County Council Chair Mel Rapozo and Vice Chair Ross Kagawa.