Gov. Josh Green has given state lawmakers a lot to contemplate with a package of proposed legislation comprising close to 340 bills.
Wednesday was the deadline for bills drafted by Green’s administration to be introduced at the Legislature, and now lawmakers can see details of plans the governor highlighted Monday in his State of the State speech to them, including a revamped visitor impact fee and a “landmark” bill aimed at converting short-term vacation rental homes into long-term housing for residents.
Green also is making another push to provide Hawaii residents with broad tax breaks, and has put forth a bill to do that after lawmakers in 2023 rejected a similar bill in favor of providing more limited tax relief to only lower-income Hawaii households.
Many bills in the governor’s package, all of which were introduced Wednesday, are intended to carry out routine annual needs of the state and to make technical or relatively small changes in operations or procedures. Many others also arise out of requests by leaders of state agencies to address spending or other needs.
The short-term rental conversion legislation from the governor proposes in part to waive criminal and monetary penalties against owners of such property who owe but haven’t paid general excise taxes and transient accommodations taxes on rental income if they rent their property for at least two years to a Hawaii resident.
This one-time amnesty proposal under Senate Bill 3105 and House Bill 2416 contains specific conditions, which include paying the taxes owed and not renting to an immediate family member or owner of the property.
Another provision in these bills would give owners a capital gains tax and conveyance tax exemption if they sell qualified short-term rental properties between June 30, 2024, and Jan. 1, 2026, for no more than $2 million to a buyer who will immediately use the property as their primary residence for at least two years.
“I’m humbly calling on my colleagues here at the Legislature to help us by implementing new policies and reforms which will return our housing units to the long-term rental market for our people,” Green said Monday to lawmakers. “This will increase supply and bring down prices in our local market, which is artificially and unfairly inflated by the global demand from visitors to our state.”
State Rep. Sean Quinlan, chair of the House Tourism Committee, said Wednesday that he believes Green’s short-term rental tax amnesty and exemption proposal can be part of alleviating Hawaii’s chronic shortage of housing for residents.
“I love the amnesty bill,” said Quinlan (D, Waialua-
Haleiwa-Punaluu). “I think it’s a really important part of bringing people in, and our goal as a society should be to convert every single short-term rental into a long-term rental.”
The governor’s new visitor impact fee legislation — SB 3095 and HB 2406 — represents a “simplified” version of measures he offered in 2023 to make visitors pay for impacts they have on Hawaii’s environment, which Green calls a “climate impact fee.”
This legislation would apply a $25 charge on transient accommodations and have the state Department of Land and Natural Resources use proceeds to minimize the impacts of, and respond to, climate change.
“We have to do more to protect our beaches in Hawaii, and our parks and our natural treasures from extreme weather, which is fueled by climate change — without raising taxes or fees on Hawaii residents,” Green told lawmakers Monday.
The governor estimated that his proposed fee can generate $68 million annually and that implementing a climate impact fee on visitors in 2023 would have been helpful to address the Aug. 8 wildfire disaster on Maui.
“This responsibility to protect Hawaii’s unique natural environment should extend to visitors to our islands,” he told lawmakers.
Green in 2023 proposed a pair of bills to have tourists as young as 15 pay $50 for a one-year “license” online or through a mobile app to use state beaches, parks, trails and other places or face penalties that would be enforced only after an initial five-year grace period.
Quinlan supports the idea of a visitor environmental impact fee but isn’t sure Green’s new draft legislation is the best mechanism because a new fee would have to be collected and managed.
“It’s interesting,” Quinlan said. “I think it’s a little outside of the box.”
Quinlan said a simpler way to establish such an impact fee would be to raise the existing transient accommodations tax and have DLNR use the additional money to address negative impacts of climate change on natural resources.
Such a bill has been introduced this year by several lawmakers led by Rep. Linda Ichiyama (D, Fort Shafter Flats-Salt Lake-Pearl Harbor), chair of the House Land and Water Committee.
This measure, HB 2081, would raise the TAT by a percentage point to 10.25% from 9.25% and send some of the new proceeds to DLNR to support Hawaii natural resources.
Another high-priority objective the governor is renewing this year after a fizzled result in 2023 is to lower taxes for all Hawaii residents.
In 2023 a bill put forth by Green proposed to boost all Hawaii income tax bracket thresholds and increase the standard deduction along with the personal exemption. It also proposed increases to a tax credit for low-income renters, the earned income tax credit, the food excise tax credit and a child and dependent care credit.
That bill didn’t pass, but lawmakers did pass a separate measure that increased the earned income tax credit, the food excise tax credit and the child and dependent care credit.
Green, in his Monday speech, referred to the tax changes enacted in 2023 “phase one” of his previous proposal that he had described as an “audacious” bill that would have saved a family of four around $2,000 or more annually.
The new tax relief proposal from the governor is in SB 3093 and HB 2404.
Green said Monday that this “phase two” plan would provide all taxpayers relief from inflation and further increase the child and dependent care tax credit.
“Families in our state struggle to make ends meet,” he said. “Despite working multiple jobs, more are living paycheck to paycheck than even before the pandemic.”
At least a few bills introduced this year by lawmakers to provide residents with tax relief could compete with the governor’s tax proposal, including SB 3280 and HB 1729.
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