On August 28, 2012, the Hawaii Tax Review Commission released its “Study of the Hawaii Tax System: Final Report” . While most of its findings were bland, it recommended the more controversial action of raising the GET from 4% to 4.5%:
Increase the GET rate to 4.5 percent
Hawaii’s GET rate is among the lowest in the country for states with this sort of broad-based consumption tax. While Hawaii has not raised its rate in over 35 years, over half of the states have raised this rate since 2000 – in many cases multiple times. Given the need to restore structural balance, an incremental increase in the GET rate is the logical method to improve the long-term financial outlook. While the GET is considered regressive, other recommended changes would reduce some of that impact.
Legislators on both sides of the aisle voiced their vehement opposition to this proposal in the report. Click here to read more. While increasing the GET seems to be dead on arrival, other proposals made in the report may get a legislative boost:
- Make permanent Act 105 (2011), which eliminated certain GET exemptions and deductions (i.e. for subcontracting and subleasing).
- Capping open ended tax credits such as the renewable energy and film tax credits with targeted grants and loan programs.
- Restoring the temporary increases on transient accommodation tax and rental cars, shifting the tax burden to tourists.
- Expand nexus.
These proposals build upon and tweak what has already passed the legislature and could provide added revenue and reduced tax expenditures with limited political backlash.
Of course, any Hawaii tax debate would not be complete without a discussion of gambling. Not surprisingly, the report declined to endorse gambling as a source of added tax revenue. Chinatown underground game rooms aside, Winner’z Zone has been operating “legal” casinos all over Honolulu for quite a while now.
While Hawaii may be an expensive business travel destination, Hawaii’s taxes on travel appear to be a mitigating factor. The Global Business Travel Association Foundation has released its annual rankings of 50 top travel destinations based on daily taxes on things such as hotel stays, restaurants, and car rentals. Chicago taxes travelers the most at $40.31 per day while Honolulu taxes travelers a mere $24.38 per day. The lowest tax city for travelers is Fort Lauderdale at $22.21 per day.
In Honolulu the taxes on travelers are primarily the 4% general excise tax on most purchases including at restaurants plus the 1/2% Honolulu County Surcharge, the 9.25% transient accommodations tax on hotel stays, and $3 per day surcharge on car rentals (down from $7.50 per day prior to June 30, 2012). Tobacco, Liquor, and Fuel taxes could also add to the total visitor tax burden.
Read NBC News’ coverage of the report by clicking here.