House panel proposes
hotel-tax hike, shuffle

By Russ Lynch
Star-Bulletin

A state House committee today proposed raising the hotel room tax to 10 or 11 percent but removing the general excise tax on income from hotel or vacation condominium rooms.

The Committee on Tourism also proposed that the room tax no longer be shared with the counties but that the counties instead get a percentage of the state's gross tax revenues.

The committee did not put those proposals into a bill, instead leaving in an increase of the room tax to 7 percent from 6 percent, with three-sevenths of the those tax revenues earmarked for tourism promotion, one-seventh for debt service on the Hawaii Convention Center, and the rest for the state and counties.

But it approved a committee report suggesting the higher tax and asking the House finance committee to look into it.

The 7 percent hotel room tax proposal passed by the tourism committee also would create dedicated funding for tourism and set up a new tourism board to administer it, based on recommendations from Gov. Ben Cayetano's Economic Revitalization Task Force.

Based on last year's tax take, the percentage of the room tax that would go to tourism funding under the governor's plan would be more than $60 million a year, compared with the current general fund allocation of $25 million. The state's tourism promotion arm would no longer have to go to the Legislature each year for funding under this plan.

Committee Chairman Romy Cachola (D, Kalihi) said the committee recognized that the counties would lose funding as the amount of room tax that now goes to them would be cut.

His committee report proposed instead that the finance committee study paying each county an amount from the state's gross tax collections equal to 80 percent of what they get now from the room tax, formally called the transient accommodations tax.

"Decreases in the counties' TAT revenue allocation, though, would be partially offset by a greater level of economic activity from significantly higher levels of tourism promotion and the state will probably be in a better position to offer grants-in-aid to the counties," the committee report said.