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The Honolulu Advertiser
Posted on: Wednesday, January 13, 2010

State tax revenues drop 8.3% since July

By Robbie Dingeman
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Revenue from the hotel room tax was up slightly over the July-to-December period, largely because that tax rate was raised July 1. Other state tax revenues dropped.

Advertiser library photo

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Hawaii news photo - The Honolulu Advertiser

Marsha Wienert

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An uptick in revenue from the state's hotel room tax was a lone bright spot in an otherwise dreary report on state tax collections for the first half of the fiscal year.

The state Department of Taxation reported a 1.5 percent increase from the transient accommodations tax, more commonly known as the hotel room tax, from July through December.

The tax has brought in more than $109 million so far, up from $107.3 million for the same period last year, most likely a reflection of the 1 percentage point increase in that tax that was passed by state lawmakers last year and went into effect July 1.

Overall state tax collections are off 8.3 percent over the first half of the fiscal year, according to the tax department.

The state Council on Revenues has projected that revenues will be down 2.5 percent for the fiscal year that ends in June, so significant improvement is needed over the next several months or the state will have a larger budget deficit.

General excise and use tax collections are down 9.7 percent, individual income tax collections are down 9.3 percent, and corporate income tax collections are down 83.9 percent.

Tax director Kurt Kawafuchi said the overall decline reflects "the continued weakness in economic activity in the state."

The number of people vacationing in Hawai'i and the consequent spending by tourists dipped again for most of the last year, according to statistics released by the Hawai'i Tourism Authority.

Yesterday, state tourism liaison Marsha Wienert said the bump of positive economic news is probably the result of two factors: the 1 percentage point increase in the hotel room tax that began on July 1 and the Jehovah's Witnesses convention that drew more than 30,000 visitors.

"That room rate was locked in a long time ago, before the deep discounting started taking place," Wienert said.

Total visitor arrivals in November declined 1.4 percent from the previous November, falling to 490,514.

With fewer visitors, there was a $17.7 million, or 2.2 percent, decline in total spending by those who arrived by air, which amounted to $771 million. Average daily spending was down slightly, from $175 per person a year ago to $174.

Since March 2008, the global economic decline, back-to-back shutdown of Aloha and ATA airlines, and fluctuating fuel prices have led to steep declines, Wienert said.

Overall, Wienert said, the small blip up shows the critical importance of the meeting and convention business.

Outrigger Enterprises Group president and chief executive officer David Carey suspects the uptick does reflect the tax increase and a positive month but he said the small increase shouldn't be cause for too much early celebration.

"Our numbers were not that robust for November," Carey said, although Waikīkī hotels were more full than some of the Neighbor Island hotels.

He said the continued popularity of the Honolulu Marathon helped boost numbers.

"December is always a tale of three events the marathon, the Christmas/New Year's holidays and the weeks in between," Carey said.

"The challenge is the sheer lack of corporate business," Carey said.