Deceptively Raising Taxes

Picture of a pile of one dollar bills

By: Lokelani Wilder

Hawaii legislators do not want to be villains.  They want the counties to be the villains instead.  Hawaii lawmakers reached agreement this week on a measure that would take hotel room tax money away from the counties but allow the counties to make up for lost funds with a tax increase of their own.  Under their new measure, counties will lose $103 million from Transient Accommodations Tax (TAT).  As compensation, the counites have been granted authorities to add a county tax of 3 percent to the 10.25 percent TAT rate to make up the lost funds.  City and county mayors and councils now face a difficult decision — lose money or burden the hotels.  It is a worrisome choice.  Visitors right now are being saddled with added expenses to get here already.  Any additional taxes might push tourists to go somewhere else. 

Along with removing the TAT, lawmakers are also bringing major changes to the Hawaii Tourism Authority, saying they are making it more accountable.  Under the new measures, HTA’s budget was cut 25 percent from $79 million to $60 million.  HTA was advertising extensively appealing to Japanese and Korean tourists.  These tourists are still in lock downs and at minimum 6-months for resuming significant tourist activities.  Lawmakers thought the appeal was misplaced and wanted to recoup the money for other purposes.  Instead of automatically getting hotel tax revenue, under the new measure, the legislature will control HTA’s money.  Lawmakers say the measures are intended to make government more efficient and accountable. 

The real reason for these measures is because the state will still be $880 million short even after funds from the America Rescue Plan Act funding reaches Hawaii.  This shortage has yet to factor in the $3.5 billion shortage for the Honolulu Rapid Transit.  The latest state reappropriations reduce the state deficit to $758 million, which is still higher than the $600 million deficit inherited six years ago when Governor David Ige took office.   The costs are not going away.  The costs are being transferred to the counties. The state deficit would be approaching $3-$4 billion were it would not for the three Coronavirus stimulus plans.  There are still two plans to go – Biden’s infrastructure/jobs plan and his forthcoming care plan.  Both of these plans are expected to each run about $2 trillion per plan.  Hawaii will get some of the money from these plans however the exact figures are yet unknown.  These two Biden plans plus the normal annual deficit will drive the U.S. national debt will be nearly $40 trillion.  At the end of 2021, the U.S. national debt will be $35 trillion.  A $40 trillion debt will be nearly double our $22 trillion Gross Domestic Product (GDP).  Our children will inherit the national debt from us. 

Hawaii needs to stop raising taxes altogether.  If anything, Hawaii may even need to lower taxes to encourage private businesses to come here. We need to privatize as much as we can.  We have been reliant on tourism, taxes, and the federal government singularly far too long. That reliance has financially wrecked the state since before the pandemic began.  The pandemic only made it worse.  No alternative energy and climate change related businesses are going to come to Hawaii because our tax rates are already too high, the unions are too big, the cost of living is too high, and the politicians have their hands deep into the everyone’s financial cookie jar.  With higher taxes, our lawmakers are taking Hawaii and America over the Pali.