Hawaii retail room tax measure advances

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HONOLULU -- The Hawaii House of Representatives passed a bill that will force travel wholesalers to pay the state's 7.25% hotel room tax on the retail rate they pass on to customers rather than the discounted rate they negotiate with hotels.

The bill now goes to the Hawaii Senate. If signed into law, it will bring an additional $30 million to $45 million to the state, according to legislators.

Debate over the bill on the House floor was intense, heightened by allegations that the bill was the work of a hotel union seeking to punish Ed Hogan and his company, Pleasant Hawaiian Holidays, for fighting the union over pay raises at the Royal Lahaina Resort on Maui, which Hogan owns.

Democratic Rep. Ed Case said the bill is bad because its intention is to punish Pleasant Hawaiian. The Hawaiian Prince Hotel.

"This bill arose out of a labor dispute between the labor union and the hotel owner, who also happens to be the largest wholesaler in the state," said Case. "This labor dispute continues to this day, and this bill is a misuse of the legislative process."

Rep. Dwight Takamine, a Democrat and author of the bill, argued that the bill will not "scare off tourists due to increases in package tour prices," as other representatives had charged, nor will it cause the state to lose its competitive advantage to other destinations.

"The increase on a tour because of this bill will be 1% to 3%, which is an insignificant amount," he said.

In the past, every time the state room taxes have gone up in Hawaii, the state has had a corresponding increase in visitor numbers, said Takamine. He said the tax revenue the law will bring to the state is for the greater good of Hawaii.

"Those who came to talk against this bill in the hearings came to protect a narrow special interest," he said.

Another Democratic House member, Jerry Chang, argued that the bill isn't a tax hike but merely "closes a loophole for those who are escaping it. More and more visitors are going through wholesalers, and if you multiply the loss to the state in tax revenues by the increased number of people using wholesalers, the potential for abuse is huge."

ASTA opposes the bill, saying agents, not just wholesalers, would get hurt when they book groups of clients in hotels and receive a discount.

"The result would be that agencies and wholesalers would pay between $29 million and $45 million per year in additional taxes," the Society said in a statement.

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