On Jan. 1, 2026, Hawaiʻi will see another increase to the transient accommodations tax, raising the rate by 0.75% through legislation passed in Senate Bill 1396. The bill aims to fund disaster preparedness and climate resiliency efforts.

While these goals are both urgent and important, the way they are being funded — by further taxing Hawaiʻi’s visitor accommodations sector — raises significant concerns, especially for small, locally owned businesses.

As president of the Hawaiʻi Mid- and Short-Term Rental (HIMAST) Alliance, I represent property owners and community-based operators across the state. Many of our members are local families, retirees, or working residents who depend on rental income to stay housed, cover property taxes, and participate in Hawaiʻi’s economy.

They are not large corporations or multinational hotel chains. They are residents doing what they can to afford to live in Hawaiʻi.

Volatile Revenues Should Not Fund Critical State Functions

Senate Bill 1396 ties future resiliency and tourism investments to increased TAT revenue, including new taxes on cruise fares and changes in how TAT is allocated to various special funds. But this funding mechanism is deeply flawed.

Tourism is among the most unpredictable sectors in Hawaiʻi’s economy. External events — such as inflation, fuel prices, global conflicts, and health crises — can cause immediate and dramatic reductions in visitor arrivals and spending. We saw this firsthand during the Covid-19 shutdowns, when Hawaiʻi’s economy experienced near-total collapse due to its reliance on tourism.

Building disaster preparedness on such a volatile funding stream is risky and unsustainable. These state programs should be backed by stable, diversified revenue sources to ensure long-term reliability, even when tourism slows.

Disproportionate Impact On Small Operators

While the bill does not single out small businesses by name, its effects are not evenly distributed. Larger hotel brands can absorb new taxes or adjust pricing through economies of scale.

In contrast, small operators — many of whom are residents renting a portion of their property or a family-owned home — face increasing financial strain. Some are retirees relying on rental income to make ends meet; others are working-class families using this income to offset rising housing costs.

These are not absentee investors. These are our neighbors. An across-the-board tax hike without differentiation between corporate and local operators risks pushing small providers out of the market entirely, with long-term impacts on housing, community stability, and economic diversity.

Lack Of Clarity, Lack Of Accountability

Although SB 1396 includes a directive for the governor to include new TAT revenue in future executive budgets, the bill lacks clear detail about how those funds will be spent.

There is no line-item accountability or performance measurement tied to the proposed investments in resiliency or tourism infrastructure. Without transparency, the public cannot be assured that these resources will be used effectively or equitably.

A More Balanced Path Forward

We support disaster preparedness. We support efforts to make Hawaii more resilient in the face of increasing risk. But we also believe that such efforts should be financed in a way that reflects sound fiscal policy — broad-based, transparent, and equitable.

Resiliency is a shared responsibility. No single industry — and certainly not its smallest participants — should bear that burden alone.