Published in The Maui News, May 17, 2015
By Mike White, for The Maui News
Prior to the state Legislature adjourning nearly two weeks ago, both the House and Senate passed House Bill 134, a measure that allows counties to enact or extend a general excise tax surcharge for transportation-related costs.
The measure, heavily sought by Honolulu’s mayor to complete Oahu’s rail system, was monitored by the news media, though little mention was made of its impacts on the Neighbor Islands.
In concept, anytime our county can generate additional revenue, it should be a very good thing – but in this case it probably is not.
If we decided to take advantage of this provision, the surcharge amount for Maui County would have to ultimately be set and approved by the County Council. Although it could allow for Maui County to enhance our public transportation system, I have maintained in my testimony to the Legislature that we cannot continue to burden our residents with additional taxes.
Although Oahu’s economic recovery has been quite positive, the Neighbor Islands continue to lag behind in key economic indicators.
More important, the general excise tax is regressive, which means it imposes a greater burden on those who have less of an ability to pay. The tax also applies to the sale of basic necessities such as food and medical services, items that are exempt from sales tax in most other states.
Instead of the surcharge for Neighbor Islands, I firmly believe that increasing the counties’ share of the transient accommodations tax (also known as the TAT or hotel room tax) is more appropriate. Maui County’s share has been capped at $23.2 million, yet we generate over $120 million annually through this tax.
The reality is that local governments bear a significant responsibility for providing a wide array of services and infrastructure necessary to support a vibrant visitor industry. For that reason, hotel room taxes like the TAT are established as municipal or county taxes throughout the nation.
Despite this notion, the State of Hawaii has increased its share of the TAT distribution by $179 million since 2007, or 2,161.7 percent, while the counties’ share has increased by a meager 2.2 percent.
While the state has taken a greater share of the TAT, the cost of core services provided to our residents and visitors by counties has continued to increase.
On average, costs for core services in Maui County from 2007 to 2014 increased 33 percent, or around $27 million. Yet Maui County has received an increase in TAT revenue of only $508,623, or 2.2 percent, over the same period.
An ongoing concern is that if we take advantage of the GET surcharge, then we will lose the counties’ share of the TAT. In fact, legislators have shared with me that if the counties’ act on the GET surcharge, they intend to take away our share of the TAT.
Therefore, it appears that those counties who do not elect to further tax their residents will effectively be punished with fewer resources.
Although I cannot speak for my colleagues, I believe this is an important issue we must all be concerned with over the next year. Counties have until Jan. 1, 2016, to approve a GET surcharge, and those that do not may lose out in the next legislative session.
My hope is that the Neighbor Island counties will stick together, forgo a surcharge and lobby hard in the next legislative session for a greater share of our TAT.
* Mike White is chair of the Maui County Council. He holds the council seat for the Paia-Haiku-Makawao residency area. “Chair’s 3 Minutes” is a weekly column to explain the latest news on county legislative matters. Go to MauiCounty.us for more information.