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State Passes Bill Allowing Additional County Tax on Tourist Lodging

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HILO, Hawaii — A bill that would allow Hawaii's four counties to impose an additional tax on hotel rooms and vacation rentals passed its final reading in the state Legislature.

House Bill 862 removes the allocation of the state's Transient Accommodations Tax to the counties, but allows each jurisdiction to add its own tax of up to 3% on tourist lodging.

Currently, the state taxes lodging at 10.25%. The tax generated about $640 million in 2019, according to the Department of Business, Economic Development and Tourism.

Of that, about $100 million was divided among the counties. The bill removes the counties’ allocation and puts the revenue in the state general fund. The bill would increase taxes on accommodations if the counties choose to add the 3% tax.

The bill also removes some funding for the Hawaii Tourism Authority.

Some lawmakers were worried the changes would lower revenues for individual counties. Others said the moves are a way for the state to change its reliance on the tourism industry.

“If you ask my constituents, they would tell you that we brought too many people who on average were not spending enough money per person,” said Oahu Rep. Sean Quinlan. "So the impacts of the visitor industry have started to outweigh the benefits in many parts of Hawaii.”

Pearl Harbor Rep. Sonny Ganaden said the state should limit taxpayer dollars sent to the tourism industry.

“This bill represents a test — a test as to whether or not trickle-down economics works in real time,” Ganaden said, adding that he hopes taxpayer dollars will be spent on improving the lives of residents instead of on public relations for tourism.

Others saw problems with the bill.

“We wanted the community to be uniform in terms of Safe Travels Hawaii, and now we’re going to have different kind of taxes on different hotels on different islands,” Rep. Gene Ward said. “I have serious doubts that this policy will ever reach anything good.”

The bill passed final readings in both the House and Senate. The bill now goes to the governor, who has until June 21 to announce what bills he intends to veto.

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