Hawaii Set to Introduce a Novel Hotel Tax

In a first-of-its kind move, Hawaii lawmakers are ready to hike a tax imposed on travelers staying in hotels, vacation rentals, and other short-term accommodations and earmark the new money for programs to cope with a warming planet. State leaders say they'll use the funds for projects like replenishing sand on eroding beaches, helping homeowners install hurricane clips on their roofs, and removing invasive grasses like those that fueled the deadly wildfire that destroyed Lahaina nearly two years ago. More:

• The hike: A bill scheduled for House and Senate votes on Wednesday would add an additional 0.75% to the daily room rate tax starting Jan. 1. The AP reports it's all but certain to pass, given Democrats hold supermajorities in both chambers and party leaders have agreed on the measure. Gov. Josh Green has said he would sign it into law.
• The revenue impact: Officials estimate the increase would generate $100 million in new revenue annually. "We had a $13 billion tragedy in Maui and we lost 102 people. These kind of dollars will help us prevent that next disaster," Green said in an interview.

• The impact to tourists: The increase will add to what's already a relatively large duty on short-term stays. The state's existing 10.25% tax on daily room rates would climb to 11%. In addition, Hawaii's counties each add their own 3% surcharge, and the state and counties impose a combined 4.712% general excise tax on goods and services, including hotel rooms. Together, that will make for a tax rate of nearly 19%.
• How that compares: The only large US cities that have higher cumulative state and local lodging tax rates are Omaha, Nebraska, at 20.5%, and Cincinnati, at 19.3%, according to a 2024 report by HVS, a global hospitality consulting firm.
• The hotel industry's view: Jerry Gibson, president of the Hawaii Hotel Alliance, which represents the state's hotel operators, said the industry was pleased that lawmakers didn't adopt a higher increase than was initially proposed. "I don't think that there's anybody in the tourism industry that says, 'Well, let's go out and tax more.' No one wants to see that," Gibson said. "But our state, at the same time, needs money."
• The shortfall: An advocacy group, Care for Aina Now, calculated a $561 million gap between Hawaii's conservation funding needs and money spent each year. Green acknowledged the revenue from the tax increase falls short of this, but he said the state would issue bonds to leverage the money it raises. Most of the $100 million would go toward measures that can be handled in a one- to two-year time frame, while $10 to $15 million of it would pay for bonds supporting long-term infrastructure projects.

(More Hawaii stories.)