2019-02-04 Letter to Richard Onishi re HB 631 and HB 1376 relating to Taxation - Surcharge on TAT

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Rep. R. Onishi Page 2 — February 5, 2019 HB 631 —Taxation on HB1376 means, that portion of the surcharge on transient accommodations tax attributable to business conducted in each county." If this supersedes the taxpayer choice, perhaps that could be spelled out in a more definitive way. Second, and from an admittedly selfish point of view, we have to recognize that under the present TAT formula, Hawaii County gets an enhanced share of the TAT revenue that flows to the counties. Given our land mass and more difficult economic condition, the existing formula for dividing TAT among the counties has been seen as fair and just, and has stood the test of time. If each county is left to raise its own TAT, that adjustment would be out the window. Hawaii County gets 18.6% of the TAT revenue allocated to the counties, which most recently came out to $19.2M. Hawaii Island does not generate 18.6% of the TAT, so to achieve the same revenue from a County-based surcharge, the surcharge rate has not yet been calculated but surely would be very high. If the Legislature is not willing to give us that much flexibility, or does not think such a rate would be good policy, then some other pathway forward needs to be found. An alternative approach is proposed in SB 198, in which the counties would be authorized to impose a surcharge of up to 2%, while continuing to receive $103M under HRS 237D-6.5 with no change to the existing allocation formula. Sincerely, IL` Harry Kim Mayor County of Hawai'i is an Equal Opportunity Provider and Employer