The Big Island just got a little more expensive, with 2019 ringing in something new — a first-of-its-kind tax that’s expected to cost consumers here $25 million a year.
All retail purchases from a plate lunch to a new truck are now subject to a 0.25 percent surcharge that Hawaii County started adding Jan. 1 to the state’s general exercise tax.
That means a total GET tax on the Big Island of 4.44 percent is collected at checkout.
The new surcharge works out to another 26 cents on every $100 purchase, which isn’t likely to bankrupt many households or vacation budgets. This could just be the start, however. Big Island leaders may double the surcharge to the maximum 0.5 percent that state law allows — and which is now the rate on Oahu and Kauai.
That’s a tempting prospect for Hawaii County lawmakers who until now have relied almost entirely on property tax revenues to finance local government.
“I was in favor of the half-percent from the get-go,” said Hawaii County Council Chairman Aaron Chung of Hilo. “I don’t see myself changing.”
Although the new surcharge is set to lapse at the end of next year, Chung and others want it extended another decade through 2030, the longest the state allows and the option already chosen by Oahu and Kauai.
Raising the tax to 0.5 percent “is one option that is being considered,” county Finance Director Deanna Sako said in an email.
Last year, Mayor Harry Kim asked Big Island lawmakers to approve that amount to balance a budget depleted of $4.9 million in property tax revenues due to lava destruction in Puna.
Council members responded in June by approving a little-liked compromise bill establishing a 0.25 percent hike effective Jan. 1. The two dissenting members, Dru Kanuha of Kona and Jen Ruggles of Puna, are both off the council after not seeking re-election.
Oahu shoppers have experienced the higher tax since January 2007, when the City and County of Honolulu became the first jurisdiction to use its state-given authority to tax consumer goods, according to the Hawaii Department of Taxation website. Lawmakers there imposed the maximum 0.5 percent GET surcharge, on the first possible day, to help finance a multibillion-dollar train system that is still under construction.
Kauai also instituted a GET surcharge Jan. 1 and went for the same level as Oahu: 0.5 percent.
Maui County is the last holdout. Despite responsibilities extending to Molokai, Lanai and Kahoolawe, Maui County has not used its authority to impose a GET surcharge.
On the Big Island, “a quarter percent isn’t changing anything for me,” said Charley Stanley recently while buying nearly $100 worth of lumber at a Hilo home improvement store.
Stanley said recent hikes in his property and gasoline taxes have hit him harder.
“Everything goes up,” he said.
Doubling the county’s GET surcharge won’t impact his purchasing, Stanley said, adding the higher tax will still be far less than the 9.1 percent his former town of Enid, Oklahoma, charges.
The Big Island’s new tax adds about $100 to the sticker price of truck and SUV models popular with local drivers.
“Even on a $40,000 car, it’s not that significant of a jump,” said Kurt Williams, senior sales manager for Big Island Toyota.
Salesman Randy Acob said while he’s not lost any deals, the tax increase did impact one buyer who waited until after New Year’s to pick up his vehicle. Despite being forewarned the price would rise, the buyer asked that the fee be waived, he said.
“He bought the car (and paid the full tax),” Acob said.
Still, Acob said there could be a small impact on vehicle sales if Hawaii County increases the GET to the full 0.5 percent.
The Big Island’s visitor industry, bolstered by the return of vog-free air in West Hawaii and the reopening of Hawaii Volcanoes National Park following last year’s extended eruption-related closure, is expected to have tourists paying 30 percent to 40 percent of the total GET costs, according to the county’s estimates.
If the Hawaii County Council makes the additional jump to 0.5 percent, the total surcharge would generate about $50 million a year.
How exactly would it be spent?
“That remains to be seen,” Chung said. “I would prefer getting the money secured first and then determining how the money is used.”
GET surcharge revenue must be spent on public transportation such as roads, bus systems, sidewalks or bicycle paths, according to state law.
“It would be nice for us to be given some flexibility in its usage,” said Chung, who said he’d like to see no more than 60 percent of the GET revenues spent on transportation.
On the Big Island, most of the tax windfall from the 0.25 percent surcharge increase will go to the county’s Hele-On bus system that Kim previously said was in “shambles.”
Broken buses, declining ridership and lax cash handling have plagued the Mass Transit Agency, which has been run by three different administrators in the past year.
According to the administration’s plan, $5.9 million of the rest of this fiscal year’s expected $10 million collection will be used for bus equipment, along with adding more routes and hours. The fiscal year ends June 30.
The remaining $4.1 million is earmarked for unspecified capital projects likely to include, based on a past request tied to the GET revenues, designing an extension to Kona’s Ane Keohokalole Highway.
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