On Politics: Legislature gives hotel room tax authority — and passes tax-increase buck — to counties

In practical politics, it is always better to have someone else raise taxes.

If you can obscure who is doing the taxing while still claiming credit for spreading the tax money around, the gambit comes close to being a “tax-free tax.”

That was what the current edition of the state Legislature did this year by, at the last moment, passing a bill to stop giving hotel room tax money to the counties.

The end product was a tortured, fairly sneaky bill design for some entity besides the Legislature to collect money to fund county operations.

Simply put, the Legislature, stung by sinking tax collections, wanted more money for state services, employee salaries, and new and increasingly expensive programs. Legislative leaders could see that a good way to get more money without raising taxes would be to take it from the counties and let the counties go find more money.

The counties shared in the state-collected hotel room tax money until this year, when the Legislature scooped their funds.

Instead of giving the counties money, the Legislature gave the counties permission to tax hotel rooms themselves, collecting up to 3% more.

Yes, figuring out who is taxing whom and for how much gets tedious and hard to follow — but if Honolulu’s good citizens want their garbage collected and their fires put out, then someone will have to cut the payroll check.

Millions in both tax collections and county services are at stake. So far only Kauai has taken up the Legislature’s challenge and put together a new tax bill.

According to The Garden Island newspaper, Mayor Derek Kawakami plans to sign the legislation, and Kauai County lawmakers were also moving to tax all gross rentals, gross rental proceeds and fair market rental value considered taxable to be collected each month.

On Maui, a tax bill is under consideration, and on the Big Island the county council is working on the issue. Hawaii County Councilmember Heather Kimball said the Council is looking at including a new tax to restore the $20 million lost.

Good enough for the neighbor island counties, but the big issue will be with Honolulu County.

So far, there are no specifics but much concern about how to handle the missing transient accommodations tax (TAT).

“When the state Legislature passed the law allowing the counties to levy the TAT directly on visitor accommodations, they also repealed the allocation given to the counties previously, taking over $100 million from what the counties rely upon each year,” according to City Council Chairman Tommy Waters.

“The City and County of Honolulu must consider levying the TAT to address that budget shortfall and other needs for the city, including affordable housing and critical infrastructure. Because TAT is assessed on tourists, it gives us a chance to have a broader conversation about visitors paying their fair share in light of the millions that we pay every year to maintain our roads, sewer, parks, beaches and other special places that benefit tourists.”

Now millions will come from tourists, with both the state and the county in on the action. The path may still be confusing, but it will also be much more expensive.

Richard Borreca writes on politics on Sundays. Reach him at 808onpolitics@gmail.com.