Legislature correct to back off hotel tax


POSTED: Friday, May 01, 2009
This editorial contains inaccuracies, but is presented here as it first appeared to preserve the public record. See below.

Either lacking the votes to override Gov. Linda Lingle's veto or finally seeing the light, the Legislature may be backing away from its bill to increase the state's hotel room tax. Hawaii's travel industry is coping with a recession and tourists' new concerns about catching swine flu. It hardly needs an additional deterrent.

The Legislature passed the bill last week, despite opposition from the Lingle administration and hoteliers, and Lingle has vowed to veto it. Clearly, lawmakers decided the tax hike would be preferable to raising other taxes that would hit residents hard, or angering public-employee unions unwilling to make concessions in their contracts with the state.

Raising taxes on tourists is hardly the way to respond to a decrease last year of nearly 11 percent in visitor arrivals and nearly 10 percent in visitor spending. The industry has continued to plummet in the first four months of this year, and concerns about a potential flu pandemic are likely to create more problems. Many hotels have offered reduced rates to cope with the problem, but an increased room tax would negate those efforts.

The hotel room tax had “;a negligible effect”; on tourism when it was first collected in 1987 at a 5-percent level, according to a study by University of Hawaii economists. However, they pointed out, that may have been because “;visitors did not know about the new tax.”; If aware, tourists probably were not bothered by increases to 6 percent in 1994 and 7.25 percent in 1999 during a period of prosperity.

Potential vacationers trimming their budgets in response to the current economic backslide are fully aware of Hawaii's tax changes through Web sites that did not exist in the early years of the room tax. Through local news coverage extended to tourism Web sites, vacation planners are fully cognizant of today's proposal to add an extra 1 percent in July and an additional 1 percent next year.

Proponents of the tax increase point out that several destinations such as New York City, San Francisco, Chicago, Seattle and Washington, D.C., have higher room tax rates. However, as Doug Sears, general manager of Grand Hyatt Kauai, pointed out to legislators, “;Most travelers staying in these cities are there on business and, therefore, charging their hotel bill to their companies.”;

About 48 percent of the revenue from the present tax goes to the counties and the remainder goes to the Hawaii Convention Center or a tourism-promotion fund. Under the bill, the entire increased revenue would be deposited in the state's general fund, a dangerous precedent.







Tuesday, May 5, 2009


Hotel tax increase alive, raid of county portions dead

        A bill that would have diverted hotel room tax revenues from county governments has died in the state Legislature.

This editorial mistakenly says the legislators were backing away from an increase in the tax rather than from the county diversion. In fact, the bill calling for the increase has been approved by the Legislature, but is expected to be vetoed by Gov. Linda Lingle. Legislators have not indicated whether they will try to override that veto should it happen.


In the interest of full disclosure, the body of the editorial has not been altered.