HONOLULU -- Hawaii is considering increases in its hotel and
excise taxes to fund a doubling of state spending on tourism
promotion to at least $60 million.
The tax package, which is supported by Gov. Ben Cayetano, would
increase the hotel room tax from 6% to 7% and the general excise
tax from 4% to 5 1/4%.
The average room rate in the state is $131, with the average
increased cost per person, per week, expected to be about $22 under
Most business and labor groups, among them the Hawaii chapter of
ASTA and the Hawaii Hotel Association, said the package is vague on
details, and they are unsure of its implications. They also are
awaiting other tax proposals from the administration. "[Tax
restructuring] will either be a travel agent's best friend or worst
enemy," said Danny Casey, who chairs the chapter's government
Agencies here are mostly small businesses and, like other small
businesses, are opposed to the proposed excise tax increase. They
must pay that tax on all revenues, including airline commissions,
and cannot pass the cost on to consumers.
The tax package, which also calls for cuts in income and
corporate taxes, is a series of recommendations by the Governor's
Task Force on Economic Revitalization, a group of 26 business,
labor and government leaders.
Despite opposition, especially from small-business owners
against the excise tax increase and from experts split on the
package's effectiveness in reviving an economy that has been
stagnant for the past six years, the task force didn't budge from
However, the task force recommended a reduction in the
"pyramiding" of the excise tax. Unlike a sales tax, it is paid at
each of the various levels of services -- taxpayers, in effect,
paying taxes on taxes, and at more than 4%.
A few sectors, mainly in the distribution of manufactured
products, pay only a 0.5% excise tax, and the task force
recommended that this percentage be extended to more types of
businesses. "If we could get a reduction to 0.5%, agencies would be
greatly helped and [chapter] members would support the tax
changes," Casey said. He added that a reduction in income and
corporate taxes also would help, "and more money in consumers'
pockets would mean more people traveling."
Tony Vericella, president and chief executive officer of the
Hawaii Visitors & Convention Bureau, said the bureau supports
the tax measure. "We've been pushing for a long time for a
dedicated level of globally competitive funding that will get us
back into the game. We support the whole package." He added that
$60 million is close to what the HVCB had asked for in previous
HVCB, a private, nonprofit group, has a budget of almost $26
million from the state this fiscal year and $24 million for
1998-99. Without a dedicated source of funding, the bureau annually
lobbies the Legislature for money.
Also, tourism industry leaders long have complained that Hawaii
is outspent by competitor destinations. A lack of funding is given
as a major reason the number of visitors -- which plummeted in the
early '90s -- still is running below the 1990 peak of 6.97
The Legislature opens Jan. 21 for the three-month 1998 session.
In addition to grappling with a complicated set of proposed tax
laws, it also will need to cut state programs -- for the fourth
consecutive year -- in the face of a 1998-99 revenue shortfall.