Some leading House lawmakers are proposing new fees on ground transportation that is used by tourists as a way to raise cash to balance the state budget in the short term, and to help cope with the impacts of global warming in the longer term.

The first draft of House Bill 433 does not indicate exactly how large of a tax increase lawmakers have in mind. When Hawaii visitor arrivals and car rentals are near their peak, a $1 per day increase in the existing car rental surcharge can raise $10 million or more per year.

House Consumer Protection and Commerce Chairman Aaron Ling Johanson said lawmakers are deliberately leaving the size of the new fee open for discussion because “there is a balance.”

“We need tourism to be able to come back, but we also are exploring this so that we’re ensuring it’s the kind of tourists that are best for Hawaii, and it’s not necessarily mass, budget tourism where everybody’s looking for the cheapest prices and people are just coming here in droves,” he said.

“We’re looking more for the higher dollar, higher spend kind of tourists,” he said.

Rental cars parked at the summit outlook on Haleakala, Maui. Lawmakers are considering a new tax on rental cars, buses and other gas-powered rented vehicles to help cope with the budget shortfall and climate change. Flickr: Anson Chappell

He said lawmakers are pursuing multiple goals at once with the bill, including funding climate change mitigation and “promoting responsible tourism.”

Lawmakers are also seeking a way to close the huge budget shortfall without taxing local residents, Johanson said.

The measure is co-sponsored by Johanson, House Energy and Environmental Protection Chairwoman Nicole Lowen, and House Finance Chairwoman Sylvia Luke.

That is significant because those three lawmakers are in charge of the three committees that must approve the bill in order for it to advance, which strongly suggests the Democratic House leadership has greased the skids.

The new surcharge would apply to all gas-powered vehicles that are rented for six months or less, including mopeds, and would also apply to vans or buses that are used to haul tourists or luggage.

The money collected under the new surcharge would initially be deposited into the state general fund to help offset the decline in tax collections during the deep recession that was triggered by the pandemic.

Chair Aaron Johanson 4pm agenda conference committee.
Rep. Aaron Ling Johanson said lawmakers also hope to attract “higher dollar” tourists who won’t mind paying the new rental car fee. Cory Lum/Civil Beat

Starting July 1, 2024, the surcharge revenue would be deposited into a new “climate change mitigation special fund” that would be used for conservation of natural resources, sustainable tourism practices, environmental education and other climate-related projects.

The money might also be used to help relocate coastal roads or other infrastructure that is threatened by rising sea levels, he said.

Representatives of the rental car industry did not immediately respond Thursday to a request for comment, but rental car industry representatives warned lawmakers last year that increasing the charge might cost them business.

“There is more competition in the market. Visitors and residents have more transportation options, including Uber and Lyft,” said Robert Muhs, Avis Budget Group’s vice president for government affairs, corporate compliance and business ethics.

Visitors already pay an existing motor vehicle customer facility charge of $4.50 per day plus a rental motor vehicle surcharge tax of $5 per day, which together are among the highest surcharges in the nation, Muhs said at the time.

Lawmakers last year were considering increasing the motor vehicle surcharge from $5 to $8 per day, but the bill failed to pass when the pandemic hit and the Capitol shut down in March, derailing most of the proposed 2020 legislation.

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