Higher Rental Car Fee Generates Extra $5 Million
Hawaii’s general fund got a $5 million boost last month, thanks to an increase in the state’s rental-car surcharge that went into effect July 1.
To help balance the budget, lawmakers approved increasing the daily rental motor vehicle surcharge tax from $2 to $7.50, with $4.50 of that slated for the general fund. The full tax originally went into the State Highway Fund. Gov. Neil Abercrombie signed into law in June.
Although the rate increased July 1, the higher surcharge was not due to the Tax Department until Aug. 20 — effectively creating a one-month reporting delay. Collections for this month won’t be reported until Oct. 20.
The state collected approximately $8.25 million in surcharges for the month of July. That compares to a total of $3.44 million collected for June rentals at the old rate. Of the $8.25 million, approximately $4.9 million will go into the general fund, while $3.3 million will go to the , Tax Department spokeswoman Mallory Fujitani said in an email.
The surcharge is anticipated to net $60.8 million for the general fund this fiscal year. The state’s budget director said it’s too early to gauge whether the collections are on track.
“While I think it may be premature to forecast a trend line for revenue with only two months in, I am comfortable that what we see thus far is still within the acceptable range,” said Kalbert Young, director of the Department of Budget and Finance. “We must also be cognizant that this revenue source is prone to economic conditions.”
A separate daily surcharge on cars rented at Hawaii airports was increased last fall from $1 to $4.50 to help pay for rental car facility improvements across the state. Federal law restricted the state from using that money for anything other than airport-related projects. So lawmakers stopped that surcharge, and instead hiked the surcharge for the state’s highway fund to the current $7.50 rate.
The highway fund also gets replenished through taxes or fees on liquid fuel, vehicle registrations, tour vehicle surcharges and motor vehicle safety inspections.
The $7.50 rental car surcharge will be lowered to $3 on July 1, 2012. The general fund diversion will sunset unless lawmakers decide to extend the provision.
The tax increase was one of five key tax measures legislators passed to generate about $600 million in new revenue over the next two fiscal years.
