Tom Yamachika: Our Best Export — Our Taxes
The temptation is to pile on to the General Excise Tax, but if it goes too high, the tourists might not come.
In our Legislature, it looks like policy-makers love surcharges on our General Excise Tax.
There are bills to extend the existing Oahu surcharge to pay for rail in perpetuity. There are bills to establish another surcharge to fund a defined benefit plan to pay for long-term care.
Why do lawmakers so desperately want to pile on the GET? One reason is they have heard that some of that tax is exported. We are fortunate to attract lots of visitors to our islands. They probably don’t pay our income tax, but they do pay the GET just like any other consumer in Hawaii. So they help pay for our government, and to that extent the rest of us don’t have to.
Isn’t that a great export?
Tourists pose for pictures at the entrance to Diamond Head State Monument last July. How much do we really want to tax them?
PF Bentley/Civil Beat
Many of our policy-makers have heard, apparently based on research that was done some time ago, that visitors pay about a third of our GET. We wondered how good a number that is today, so we came up with some current numbers.
First we looked at the Oahu surcharge. Honolulu Authority for Rail Transit wants the current surcharge to be extended forever because it sees it, at least in part, as a way to get our visitors to subsidize the operating costs of rail.
We took the Hawaii Tourism Authority’s tally on visitor spending on Oahu, and multiplied by 0.5 percent, the surcharge rate. There is some visitor spending that’s not subject to the surcharge, interisland air fare and helicopter tours are examples, but the data indicated that the effect of these activities is minimal.
Next we pulled the Department of Taxation’s collection reports and compared that calculated number with the total county surcharge collections by year.
We did this calculation for calendar year 2013 and back a couple of years for comparison.
| Revenue Source | 2013 | 2012 | 2011 |
|---|---|---|---|
| Total Visitor Expenditures | $14,520.500,000 | $14,364.800,000 | $12,254,600,000 |
| Total Visitor Expenditures in Honolulu | $7,358,700,000 | $7,672,500,000 | 6,351,400,000 |
| Oahu Surcharge on Visitor Spending = 0.5% | $36,800,000 | $38,400,000 | $31,800,000 |
| Oahu Surcharge Collections | $236,600,000 | $181,600,000 | $219,600,000 |
| Oahu Surch. on Visitor Spending as % of All Surch. | 15.55% | 21.13% | 14.46% |
| Revenue Source | 2013 | 2012 | 2011 |
|---|---|---|---|
| Total Visitor Expenditures | $14,520,500,000 | $14,364,800,000 | $12,254,600,000 |
| GET on Visitor Spending = 4% | $580,800,000 | $574,600,000 | $490,200,000 |
| GET Collections | $2,907,600,000 | $2,844,700,000 | $2,588,500,000 |
| GET on Visitor Spending as a % of All GET | 19.98% | 20.20% | 18.94% |
Source: HTA, DOTAX, Tax Foundation of Hawaii calculations
This data indicates that we are exporting around 15-20 percent of our general excise tax, again better than nothing but it’s a bit shy of a third.
This is hardly surprising. The previous estimate of exported tax apparently was made at a time when visitor counts were up and the economy was better. Since then we’ve added two points to the transient accommodations tax and jacked up the charges on rental vehicles, among other tourist-related assessments.
Leisure travel is a discretionary expense for people, not a necessity. So if it’s too expensive they won’t travel, or if they do travel they’ll go elsewhere.
If they don’t come, we can’t export our tax burden to them. So if we pile more and more surcharges on our GET, we can expect more of a burden to bear and less help from our visitors.
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