Putting The Tax Squeeze On The Tourists

The Hawaii legislature has passed a bill to raise hotel room taxes, but Gov. Linda Lingle is expected to veto it, the Honolulu Advertiser reports.

Not so much in Nevada, where Gov. Jim Gibbons is allowing an increase in the room tax to become law without his signature. On July 1, the room tax rate will increase from 9 percent to 12 percent, as the Las Vegas Sun reported last month.

In Hawaii, the room tax would rise from 7.25 percent to 8.25 percent in July and to 9.25 percent in July 2010 under the bill passed Wednesday. The legislature also passed tax increases on incomes of more than $150,000 a year and on tobacco products.

The issue is the same in Hawaii and Nevada. The economic slump is really slamming states that rely on tourism for tax revenue, and the temptation is to slam tourists back. But the wisdom of raising taxes on a dwindling tax base is questionable at best. Tourists have an option that residents don’t — they can stay away.

Hawaii’s hotel occupancy rates are already way down. They were 12.4 percent lower in February from a year earlier, hitting 75 percent, the lowest point in 18 years, the Los Angeles Times reports.

Occupancy was off only 5.5 percentage points to 83.9 percent during the same period in Las Vegas, but gaming revenues were down 14 percent, the Las Vegas Sun reports.

Raising taxes on visitors is unlikely to increase tourism. But the money has to come from somewhere.


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