In an unprecedented move, lawmakers in Hawaii have approved groundbreaking legislation seeking to increase the state’s lodging tax. The goal is to fund projects aimed at enhancing environmental protection and fortifying defenses against natural disasters exacerbated by climate change. Governor Josh Green has expressed support for the measure and is expected to sign it into law.
This legislation introduces a 0.75% increase to the existing state taxes imposed on tourism-related accommodations, including hotel rooms, timeshares, and vacation rentals. Additionally, it places an 11% tax on cruise ship bills, adjusted based on the duration these vessels remain docked at Hawaii’s ports.
State officials anticipate the new taxes will generate nearly $100 million annually. These funds are earmarked for projects such as replenishing eroded beaches in Waikiki, advocating the use of wind-resistant fixtures on roofs during storms, and mitigating flammable invasive grass species that fueled the devastating 2023 wildfire in downtown Lahaina.
Widely supported by both chambers of the state’s Democratic-majority legislature, this policy marks a significant national first; no other state lodging tax specifically dedicates funds to environmental efforts and climate resilience.
With the new law, the short-term accommodation tax will rise from 10.25% to 11% starting January 1st. Travelers will face a total excise tax of 4.712% on nearly all goods and services, adding to a 3% county lodging tax. Consequently, the combined checkout tax will be one of the highest in the country at 18.712%.
Governor Green believes the increase is negligible enough that visitors might not notice. He underscores the intrinsic value people place on Hawaii’s natural beauty and suggests they will appreciate investments in environmental preservation.
“The more we advance environmental policy and improve our living spaces, the more we’re likely to see dedicated travelers returning to Hawaii,” Green stated in an interview.
The revenue derived from the 0.75% increase and the newly introduced cruise ship tax will be specifically allocated for environmental and climate-related purposes. Meanwhile, proceeds from the standing state lodging tax will continue supporting the general fund, including infrastructure projects like Honolulu’s rail system.
Chicagoan visitor Zane Edleman indicated that some tourists might opt for destinations like Florida if they find Hawaii too expensive. However, Edleman believes transparency about how the funds are spent could influence spending decisions. “If you genuinely promote that this is for climate preservation and prove that funds are delivering results, I think you might win people over,” he remarked.
Initially, the proposed legislation sought a higher tax increase, but lawmakers moderated it after considering concerns about sustaining tourism while addressing environmental needs. “We needed to strike a balance between supporting the industry and securing resources for environmental sustainability,” commented Rep. Linda Ichiyama, House Vice Speaker.
John Pele, Maui Hotel and Lodging Association’s Executive Director, acknowledges consensus about directing funds towards a beneficial cause but ponders whether Hawaii might become prohibitively costly for tourists. “Are we pricing tourists out of a trip to Hawaii?” he questioned. “That remains uncertain.”