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Maui County plans 30% rise in visitor tax if Gov. David Ige signs bill

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Maui Mayor Michael Victorino said he plans to increase the county’s transient accommodations tax by 30% if Gov. David Ige approves a bill that allows the counties to raise their own TAT.

State legislators on Tuesday voted to advance HB 862 to Ige for his signature.

The bill eliminates the $103 million county share of the transient accommodations tax but allows the counties to raise their own TAT up to 3 percentage points for up to a 10-year period.

Victorino said Tuesday that he does not support the state’s decision. However, he said raising Maui’s TAT from 10.25% to 13.25% would help mitigate the financial impacts of tourism.

“I’d like to see 1% go toward the development of affordable and attainable workforce housing, 1% for emergency services including ocean, land and air rescues, and 1% to fund visitor education and cultural restoration throughout Maui County,” Victorino said in a statement. “The loss of TAT funding is a blow, especially since the counties provide services for millions of visitors each year including police and fire protection, parks and road maintenance, and waste disposal. A new County tax surcharge can help to offset some of these costs. I look forward to working with the Maui County Council on this initiative.”

Maui’s new 3% TAT tax surcharge, if enacted, would be levied on all stays at hotel rooms, licensed vacation rental units and other short-term accommodations.The mayor said the surcharge would serve as an incentive for Maui County to crack down on the growing number of illegal vacation rentals that don’t pay TAT.

Victorino is the first of the county mayors to announce that he would raise TAT if the the bill becomes law.

It’s still unclear whether the other counties would choose to raise their own TAT, and if they did that, it would even make them whole.

Under the status quo, Kauai County received 14.5% of the $103 million TAT distribution; Hawaii County got 18.6%; Honolulu County got 44.1%; and Maui County received 22.8%.

In fiscal year 2019 HTA helped bring $631 million in TAT collections to the state. But while tourism has enjoyed a spring break rebound, full recovery is still some years out.

State economist Eugene Tian said the Hawaii Council on Revenues in March estimated TAT revenues for fiscal year 2020 at $560.6 million and at just $184.5 million for fiscal year 2021.

The counties’ TAT share has been frozen since Ige turned off distributions in the midst of the COVID-19 crisis, which dropped TAT collections and distributions substantially.

And, it’s not known, if visitors would tolerate increasing the cost of a Hawaii vacation, especially when hostility against tourism is on the rise, and tourism infrastructure still hasn’t fully reopened following COVID-19 containment measures and a significant reduction in travel demand.

If the TAT had been made in March, it would have raised the daily TAT from at least $29 to at least $38 per night based on the average daily rate. Since Maui’s average daily rate is higher, it would have raised the cost of TAT from at least $48 to $62 per night.

On top of potentially losing the county distribution of TAT, the Maui County Council recently voted 8-0 to defund the Maui Visitors Bureau and instead set up a grant fund for groups to manage tourism.

Victorino had set aside $1.5 million for the Maui Visitors Bureau. However, the council reduced the amount to $500,000 and said it could now only be used for tourism management.

Now, if the Maui Visitors Bureau wants the money they’ll have to compete with other applicants for the grant, which would be administered by the mayor’s Office of Economic Development.

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