TAT vs. GET: Which tax is best?
Hawaii County Council members seemed at odds Tuesday on whether they’d rather have the state give the county back its share of the transient accommodations tax or allow it to raise general excise taxes.
The discussion in the council Finance Committee ended with no vote, but it gave a glimpse into which council members preferred which mode of financing county operations.
On the one hand, some members said, the state Legislature, particularly House Speaker Joe Souki, has been talking about removing the cap placed on the counties’ share of the TAT during the recession. That money, collected as a surcharge on hotels and lodging rentals of less than 180 days, primarily comes from island visitors.
On the other hand, having the option of raising the GET would forestall the counties from having to go hat in hand every legislative session to ask the state for money. Supporters say one-third of the GET is paid by tourists.
“This is an opportunity for the state to give us home rule,” said Finance Committee Chairwoman Valerie Poindexter of Hamakua. “It’s giving us the authority without having to go to the state.”
The Hawaii Council of Mayors has requested bills SB2115 and HB1606 to allow the counties the extra penny on the dollar, a 25 percent increase in the tax. The mayors say they currently don’t intend to raise the tax; they just want the option open to them in case they need to.
“This may be a moot issue if the state Legislature does not pass either one of these bills,” said South Kona/Ka‘u Councilwoman Brenda Ford.
But Kohala Councilwoman Margaret Wille believes the counties should be more assertive in pushing to get its TAT money back instead. The Hawaii State Association of Counties, the group representing county councils, struck that item from its package of legislative priorities after Kauai objected. The executive board of the council association ended up endorsing the GET bills at the request of the mayors’ council.
“I don’t think the taxpayers differentiate much between authority to do something and doing it,” Wille said.
Mary Begier, representing Hawaii Island Realtors, noted that the GET, unlike a sales tax that is collected only at the retail level, is collected at each step of the manufacturing, wholesaling and retail process. It also applies to services, rents, interest, commissions and other forms of income, significantly increasing the cost of building a home.
“We are opposed to any increase in the excise tax. We believe that the GE tax is a regressive tax and it will make it more difficult for people to own homes,” said Begier. “All goods and services will cost more, and the consumer is the one who is going to foot the bill.”