Raising Hotel Tax in Hawaii to Address Climate Change Challenges
Hawaii's Innovative Tax Move:
In a groundbreaking decision, Hawaiian lawmakers have passed a bill that will boost the state's lodging tax to fund environmental protection and fortify defenses against climate change-induced disasters. This pioneering measure is prepared to receive the green light from Governor Josh Green.
The bill introduces a 0.75% tax on top of the existing hotel, timeshare, vacation rental, and short-term accommodation tax. Additionally, a new 11% tax will be imposed on cruise ship bills, proportionate to the duration of the ships' stays in Hawaii ports.
Experts concur that this is the nation's first state lodging tax dedicated to environmental preservation and counteracting climate change effects. The fiscal year is expected to accumulate close to $100 million, which will be allocated to projects like revitalizing eroding Waikiki beaches, propagating the use of hurricane clips, and eliminating flammable invasive grasses, like those that contributed to the devastating Lahaina wildfire in 2023.
Both houses of the Legislature, dominated by Democratic majorities, approved the bill with considerable margins.
Background KnowledgeWhile Hawaii already imposes a 10.25% tax on short-term rentals, starting January 1, the tax will escalate to 11%. The state's counties separately collect a 3% lodging tax, and visitors bear an additional 4.712% general excise tax inclusive on all goods and services. Consequently, the total tax bill at checkout will rise to 18.712%, one of the highest in the nation.
Governor Green believes the increase is imperceptible enough that it won't be noticeable to most travelers. He confidently expects that tourists, drawn to Hawaii's natural beauty, will welcome the prospect of contributing to the protection of shorelines and communities.
Funds primarily sourced from the 0.75% tax addition and the cruise ship tax solely will be allocated to natural resources and climate change-related initiatives. Existing revenue from state lodging taxes will continue to flow into the state's general fund and help fund the Honolulu rail line construction.
While some guests might be enticed to opt for alternate destinations like Florida, Chicago visitor Zane Edleman asserts that transparency regarding the funds' usage could persuade tourists to embrace the extra cost. "If you highlight the point that this money is to save the environment and provide evidence that the funds are being used effectively, people could agree with the cause," Edleman stated.
The original draft of the legislation suggested a more significant increase, but lawmakers scaled it back to address concerns about maintaining the tourism industry and supporting environmental sustainability concurrently.
PerspectiveDemocratic Rep. Linda Ichiyama, vice speaker of the House, underscored the importance of finding a balance between sustaining the tourism industry and addressing environmental concerns. John Pele, executive director of the Maui Hotel and Lodging Association, agrees with the cause but ponders whether increasing taxes on tourists may deter them from visiting Hawaii. Ultimately, the answer lies in how the state communicates and uses the additional revenue.
- Governor Josh Green is likely to approve the bill, which is prepared to boost Hawaii's lodging tax to fund environmental protection and counteract climate change effects.
- The bill, once enacted, will likely accumulate close to $100 million annually, which will likely be allocated to projects strengthening local shorelines and communities.
- The new tax measure is likely to be the nation's first state lodging tax dedicated to environmental preservation and counteracting climate change effects.
- Transparency regarding the funds' usage could likely persuade tourists, like Chicago visitor Zane Edleman, to embrace the extra cost associated with the increased tax.
- Balancing the need to sustain the tourism industry with addressing environmental concerns is essential, as highlighted by Democratic Rep. Linda Ichiyama and John Pele, executive director of the Maui Hotel and Lodging Association.
