House OKs wholesaler room tax

A bill to impose the hotel-room tax on tour wholesalers and collect an extra $30 million for the state treasury was approved by the House yesterday over the objections of Republicans and two Democrats.

Supporters said the bill will plug a "loophole" in the law that allows wholesalers to escape without paying the tax. But critics branded the bill as a $30 million tax increase.

Lawmakers in the House and Senate voted on more than 400 bills yesterday in a flurry of activity to prepare for a deadline known as "crossover." By midnight tomorrow, all House bills must cross to the Senate and all Senate bills must cross to the House or they cannot be passed this year.

Advancing in the House or Senate were proposals to raise the age at which minors can legally have sex with adults; to legalize the sale of syringes to drug addicts to prevent the spread of disease; to raise the minimum wage; to impose tougher penalties for hate crimes; and to increase mandatory prison terms for certain drug offenders.

The House voted 29-21 to give preliminary approval to a measure to impose the 7.25 percent hotel-room tax on tour wholesale companies that resell blocks of hotel rooms. The measure now goes to the Senate for further consideration.

The plan to impose the tax on tour wholesalers was suggested by the International Longshore and Warehouse Union, which has been negotiating for 10 months for a new contract for about 300 employees at the Royal Lahaina Resort on Maui.

The resort is owned by Ed Hogan, founder and chairman of Pleasant Travel Service Inc. Hogan also runs wholesale tour companies, including Pleasant Hawaiian Holidays.

Democratic Reps. Blake Oshiro and Kenneth Hiraki survey the House floor during yesterday’s discussion of legislation. Cory Lum • The Honolulu Advertiser

The ILWU argued there is a loophole in the room tax: When hotels rent rooms to individual tourists or to tour wholesalers, they pay the state’s 7.25 percent hotel-room tax.

The wholesalers buy blocks of rooms from the hotels, mark up the prices and resell them. But the hotel-room tax law is written so the tax is not imposed on wholesalers when wholesalers mark up hotel rooms and resell them.

Eusebio Lapenia Jr., president of ILWU Local 142, has acknowledged that "one can interpret" the union proposal to impose the hotel tax on wholesalers as an effort to pressure the company into a settlement.

Rep. Ed Case, D-23rd (Manoa), argued that passing the bill at the behest of the union in the midst of negotiations "is a misuse of the legislative process."

He also insisted that "there is no way we are closing a loophole" with the bill because legislative records show lawmakers never intended to impose the tax on tour wholesalers. "This bill proposes to raise an additional $30 million in taxes," Case said.

House Finance Committee Chairman Dwight Takamine, who introduced the bill, said the measure is about tax equity, not raising taxes.

State statistics show almost 48 percent of arriving tourists are traveling on tour packages, and that percentage is growing, he said. That means the loss to the state because of "leakage" is increasing.

The law was not originally written in a way that applied the tax to tour wholesalers, but "we know that when circumstances change, we have to respond to that," said Takamine, D-1st (Hamakua, N. Kohala).

House Bill 1589 was approved with all 19 House Republicans, Case and Rep. Hermina Morita, D-12th (E. Maui, N. Kaua‘i), opposing it.

In the closest vote of the day, privatization supporters in the House failed in a 27-23 vote to amend a bill to give Gov. Ben Cayetano a free hand to determine which government services should be contracted out to private companies.

House Republicans racked up a pair of rare victories by using their 19 votes to defeat bills to float tax-exempt revenue bonds to help finance two industrial projects. It takes a two-thirds majority to approve the bonds, and the Democrats no longer control two-thirds of the House.

House Bill 1149 would have offered up $10 million in bonds to help the high-tech company Science & Technology International finance a move from downtown to Kaka‘ako. The company would be responsible for paying the principle and interest on the bonds.

STI manufactures optical imaging instruments that can detect submarines and screen for cancer cells, among other things.

House Bill 872 would have provided another $10 million in special-purpose revenue bonds to help STI finance a Hawai‘i freeze-drying plant for products such as coffee.

The Senate voted 22-3 to approve hate-crime legislation that would give extended prison terms to offenders who choose victims based on race, color, religion, gender or sexual orientation.

Sens. Norman Sakamoto, D-16th (Moanalua, Salt Lake), Fred Hemmings, R-25th (Kailua, Waimanalo), and Sam Slom, R-8th (Wai‘alae Iki, Hawai‘i Kai), opposed the bill, saying it tries to legislate tolerance and creates classes of people who would be worth more than others.

Senate Judiciary Committee Chairman Brian Kanno, D-20th (‘Ewa Beach, Makakilo, Kapolei), said present laws already provide extended prison terms for offenses against children, the elderly and the disabled.

The Senate also voted 20-5 to pass a bill to raise the state minimum wage from $5.25 to $5.75 an hour in 2002 and to $6.25 in 2004. Sakamoto, Hemmings, Slom, Sen. David Ige, D-17th (Pacific Palisades, Pearl City), and Sen. Bob Hogue, R-24th (Kane‘ohe, Kailua), opposed the bill.

The Senate also voted 18-7 to approve a bill that would prohibit people younger than 18 from driving from 11 p.m. to 5 a.m. unless accompanied by a licensed driver over 21.

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