HomeMy WebLinkAbout2019-02-04 Letter to Richard Onishi re HB 631 and HB 1376 relating to Taxation - Surcharge on TAT +4Y OS N''
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County of Hawaii
Office of the Mayor
25 Aupuni Street,Suite 2603 • Hilo, Hawaii 96720 • (808)961-8211 • Fax(808)961-6553
KONA: 74-5044 Ane Keohokalole Hwy, Bldg C • Kailua-Kona, Hawaii 96740
(808)323-4444 • Fax(808)323-4440
February 5, 2019
Rep. Richard H.K. Onishi, Chair
COMMITTEE ON TOURISM & INTERNATIONAL AFFAIRS
Hawai'i State Legislature
Dear Representative Onishi and Committee Members,
RE: HB 631, RELATING TO TAXATION and HB 1376, RELATING TO
TAXATION (authorizing a County surcharge on the TAT)
Thank you for the opportunity to testify on HB 631 and HB 1376, both of which
would authorize each County to impose a surcharge on the State's transient
accommodations tax.
We appreciate the innovative approach these bills bring to the table, and the
recognition of the counties as partners in the affairs of Hawaii governance. We do not
shy away from the responsibilities that these bills would place on the counties to raise
their own revenue, and appreciate that the State would still "levy, assess, collect, and
otherwise administer the county surcharge," because it would be wasteful and
prohibitive for each County to set up parallel structures.
Having recognized the benefits of HB 631 and HB 1376, we do have to express
concerns.
First, the bills provide that "(f) The taxpayer shall designate the taxation district to
which the county surcharge on transient accommodations tax is assigned..."
This may be standard language, but it would seem to allow each taxpayer to choose
that jurisdiction which imposes the lowest surcharge. That surely is not what is intended,
and would need to be clarified. Elsewhere in the bills it states that "the director of
taxation shall have the exclusive rights and power to determine the county or counties in
which a person is engaged in the business of furnishing transient accommodations and,
in the case of a person engaged in the business of furnishing transient accommodations
in more than one county, the director shall determine, through apportionment or other
County of Hawaii is an Equal Opportunity Provider and Employer
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