President of Hawai’i Island Chamber of Commerce Statement on Pending Special Session on Honolulu Rail Project

Hawai‘i Island State Representatives and Senators

Re: Honolulu Area Rapid Transit system funding

Dear Representatives and Senators,

From August 28 to September 1 the Hawai‘i Legislature will be in session to assist the City and County of Honolulu with the capital for funding the Honolulu Area Rapid Transit system. We thank you for this opportunity to voice our concern and opinion in this matter.

We understand that the Legislature will be considering proposals including:

  • Maintaining the current general excise tax (“GET”) rate premium for applicable Oahu transactions through 2037.
  • Increasing the transient accommodations tax (“TAT”) rate for applicable services on Oahu.
  • Increasing the TAT rate for applicable services on all islands
  • Assessing premium GET taxes on a statewide basis.

The Hawai‘i Island Chamber of Commerce strongly recommends funding the capital shortfall for the Honolulu Area Rapid Transit system by extending the GET for transactions in the City and County of Honolulu only. We note the following:

  • Uncomfortable as it is to point out, the shortfall is primarily the result of management decisions made by an agency of the City and County of Honolulu. Neighbor islands were not part of either the management or the process. Asking the residents and visitors of the neighbor islands to pay for this process gone awry is not reasonable. Services provided by HART will be provided only on Oahu benefitting primarily Oahu residents and not the residents of the neighbor islands. We believe any impact should be borne by the future users of HART.
  • A major argument against simply allowing the GET on Oahu to continue is that this tax is regressive. However, this argument glosses over several economic realities that businesses face every day. Taxes of any kind increase the total price paid by the buyer. Higher prices for any good or service result in some level of reduced demand – if not for that service, for other services where those dollars may have been spent:
  1. While we do not know the number of travelers who will choose not to travel to Hawaii because of a higher TAT – there is no doubt that at the margin some will choose not to come here or to delay a trip.
  2. Some of those who do come will find that they must curtail their spending while here in order to stay within their budget.

In either of these cases, the dollars spent on goods and services in Hawaii will be reduced. The ripple effect of reduced spending will be a reduction in employee hours (and jobs) absorbed almost exclusively by employees at the lowest rung on the employment ladder. In short, these employees will suffer by losing income much more dramatically than they would if the current 0.5% premium in GET taxes is maintained on Oahu.

Beyond this, there is the simple equity issue. Should we be charging those who have no vote (tourists) for services that they are not likely to use – simply because they have no vote? This is not the right decision.

  • Finally, the City and County of Honolulu – most affected by Rail – has stated firmly that its choice is to fund by extending the GET through 2037. If that is their choice, it is not clear to us why we should over reach to further manage their decision.

Sincerely,
Bill Walter, President

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