Governor seeks 2 percent hotel room tax increase

Governor seeks 2 percent hotel room tax increase
Updated: Jan. 29, 2013 at 6:48 PM HST
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Prompted by the record visitor arrivals, Gov. Neil Abercrombie is proposing to raise Hawaii's transient accommodations tax by 2 percentage points.

It would be the third increase in the TAT four years -- increases that were supposed to be temporary hikes. But the governor also wants to make them permanent.

The bottom line for hotels, inns and timeshares is the possibility of an 11.25 percent tax rate on every room they sell.

"Times have gotten better but what people don't see is that hoteliers are very, very compressed," said George Szigeti, CEO of the Hawaii Lodging & Hotel Association. "The neighbor islands aren't back to their original peaks."

Szigeti says it's unfair to keep tapping into an industry that's still recovering from the recession.

Mom and pop operators -- like bed and breakfasts -- said they are especially vulnerable to any increase since their profit margins are smaller.

"It begins to hurt and people take it into consideration because they look at the rate and all of the sudden bingo, aloha there another 13 percent on top of that," said Mark Glen, owner of the Manoa Valley Inn.

Tax experts question the rationale for the increases are needed, economic activity will likely mean higher tax revenues anyway.

Room rates is up, the visitor count is up, spending is up just that alone should be generating additional revenues," said Lowell Kalapa, executive director of the Tax Foundation of Hawaii.

"Why do you need to maintain the higher rate and why do you need to raise it even more to eleven and a quarter percent."

Hoteliers say they only agreed to the temporary hikes.. to help the state during the down economy.

State senate president Donna Kim.. wouldn't mind making the increase permanent but draws the line at additional hikes.

"Things are going good, we don't want to hut them in any way and we can only go up for so long and the law of averages we'll start a downturn again," she said.

Lawmakers have less than three weeks to schedule a hearing on the governor's bills or they're likely done until next year.

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