A special session of the Hawaii Legislature is underway. And the main topic is a Hawaii transient accommodation tax increase.
The Hawaii Legislature convened a special session earlier this week to discuss a bailout plan for Honolulu’s massively over budget rail transit project. And at the heart of this bailout plan is an increase in Hawaii’s transient accommodation tax.
Honolulu Rail Transit
Development of a fixed-rail system has long been a topic of Hawaii politics. However, in the past decade, the issue’s importance grew so much that it became a deciding factor in elections. And in 2012 construction began on the then estimated $5.3 billion; the most expensive public works project in Hawaii’s history.
As planned, the elevated rail line will run 22-miles from East Kapolei to Ala Moana Center near Waikiki. The route will have twenty-one stations including one at the Daniel K. Inouye International Airport. And currently, the rail system is planned to open in two phases. The first phase, which will connect East Kapolei and the Aloha Stadium, will begin service 2020. Then, the rest of the line to Ala Moana Center will open in 2025. This, of course, is barring any further delays to the project.
The Bail Out
To pay for the system, the State Legislature passed a bill allowing individual counties to raise the general excise tax 0.552%. So when you’re on Oahu, the general excise tax is 4.712%, while the rest of the state is at 4.16%. But due to delays and cost overruns, the project is currently experiencing a funding shortfall. To remedy this, the City & County of Honolulu, the Hawaii State Legislature, and the FTA have been discussing a few options. And the option that looks like it will pass is the Hawaii State Legislature’s proposal to extend the General Excise Tax surcharge by a few more years, and to increase the Transient Accommodation Tax.
As I said earlier, the Hawaii State Legislature is in a special session to debate and vote on this plan. In fact, today is the final read through at the Senate, and it is widely expected that the bill will pass. If it does, then it’s onto the House. And if the bill survives all of its votes, then we’ll see a 1% rise in the Transient Accommodation Tax from 9.25% to 10.25% for 13 years. But as anyone that’s stayed in a hotel in Hawaii knows, the overall room tax includes the General Excise Tax too. This means transient accommodations on Oahu are subject to a total room tax rate 13.962%.
What the Hawaii Transient Accommodation Tax Increase Means for You
A 1% increase in the TAT doesn’t seem like a lot, but a little can add up quickly. For example, my recent two-night stay at the Laylow Waikiki coast me $545.20 before tax. And at today’s rate, my room tax is $75.89. But when the bill passes, that same rate would incur a room tax of $81.34. Which means at that (admittedly low) nightly rate of $272.60, you’d end up spending an additional $2.73 per night on taxes once the bill goes into effect. So over the course of a week, that’s nearly a $17 extra in room taxes.
Okay, so this increase really won’t make a difference for visitors. $17 more per week isn’t going to cause potential visitors to change their plans. But $17 could buy you, you know, another Mai Tai at the hotel bar. And remember, this room tax rate of 13.962% (current) is unique to only Oahu. The TAT on all other islands is currently at 13.41%.