The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Finance on March 29, 2023.
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March 29, 2023
3 p.m.
Conference Room 308 and Videoconference
To: House Committee on Finance
Rep. Kyle T. Yamashita, Chair
Rep. Lisa Kitagawa, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: SB304 SD2 HD2 — RELATING TO VISITOR IMPACT FEES
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer comments on SB304 SD2 HD2, which would establish a $50 license to be paid by any non-resident aged 15 or older in order to visit a state park, beach, forest, hiking trail or other natural area owned by the state.
We have grave concerns about several aspects of this bill, ranging from its legality to its applicability and enforcement.
In addition, we believe that this proposal may have unforeseen consequences for small businesses in the state and for the economy as a whole.
Finally, we have questions about the allocation of the revenues from the fee and whether the program would properly benefit Hawaii residents.
We hope you will consider the following issues as you deliberate on this measure:
>> Constitutionality: There is reason to doubt whether this program would pass constitutional muster. The U.S. Supreme Court frowns upon any law that would restrict the right to travel freely between states and has ruled against disparate resident/nonresident tax schemes under both the Privileges and Immunities Clause and the Equal Protection Clause.[1]
While different resident user fees such as hunting licenses or park entry fees have been upheld, the licensing scheme proposed here is far broader in scope and more akin to a tax than a user fee.
The problem is partly one of scope. In order to fall into the category of a user fee (like different park entry fees for residents and non-residents), a visitor impact fee would have to be so limited in application that many tourists would not have to pay it in order to enjoy their planned Hawaii vacation.
However, if it were so limited, then the fee would not result in the levels of revenue envisioned in this bill. If the fee were generally applicable to nearly every Hawaii visitor, it would cease to be a limited user fee, making it much more vulnerable to a legal challenge.
Given that the rationale for the fee is the impact of visitors upon the natural environment, the state cannot plausibly claim that there is a rational basis for treating the impact of tourists as more injurious to Hawaii’s ecosystem than full-time residents.
Thus, unless residents were also charged for a similar license, the entire scheme risks being overturned by a federal court.
>> Applicability: Though presented as a fee that will only be paid by tourists, this bill underlines the fundamental difficulty of delineating who is “local” and who is a visitor.
Under the bill, anyone who can provide a valid state ID, valid Hawaii school ID, an income tax statement from the previous year or some form of official documentation from a government agency, financial institute, insurance agency or utility agency would count as a resident for the purpose of the license.
Thus, anyone who has moved to the mainland for more than a year or so is now a “visitor” and subject to the fee. This could lead to some very strange results.
Under this bill, Oprah Winfrey is a resident because she can produce a utility bill, but Iam Tongi, the “American Idol” contestant whose family was “priced out of paradise,” is a visitor.
A billionaire who pays taxes in Hawaii as well as other states is a “resident,” but a local family who had to move to Nevada to make ends meet will have to pay hundreds of dollars if they want to come home for grandma’s birthday party at the beach.
Moreover, the bill makes no mention of members of the military stationed in Hawaii. Will they be exempted from the fee, or will the state require licenses from raw enlistees who are not here by choice?
>> Administration and enforcement: There would be considerable logistical hurdles involved in administering this fee so that it would not be automatically applied to any non-resident who enters the state, regardless of whether they intend to use any state park or beach.
After all, someone who is only passing through or only attending meetings in a hotel would not need to pay the license fee. If they were charged anyway, this would make it a fee to enter the state, which would certainly be invalidated by a court.
This problem leads to serious questions of how the license would be enforced, especially in areas with no point of entry where visitors could show the license. The penalties section of the bill clearly indicates the intent to include an enforcement mechanism, but it is unclear how this will be accomplished.
Would government officials patrol Hawaii’s state parks and beaches, demanding licenses from anyone who appears to be a tourist? This could quickly devolve into a civil rights issue.
In addition, the program incentivizes designing a vacation so as to avoid locations that require the payment of the impact fee. It is very possible that the unintended consequence of the impact fee will simply be to increase the visitor impact on beaches and natural areas that do not fall under state control. This would not only frustrate the stated intent of the bill, but could create new problems of visitor congestion and impact.
Delaying the effective date of the program until July 2025 and delaying the assessment of penalties for five years would push the administrative and enforcement problems down the road. However, those issues will still exist whenever the program and penalty period begin.
In addition, administration and enforcement could end up costing the state significant resources in both labor and funding. It is unclear from this bill whether enough research has been done on the full cost of this program.
>> Economic impact: This bill assumes that a visitor impact fee would not negatively affect tourism. However, if the average family visiting Hawaii had to add a $200 license fee to their vacation budget, it is likely that they would try to compensate for that expense.
Hawaii’s independent restaurants, retail establishments, tour companies and other small businesses depend on visitor spending for their survival. Though it might not affect transportation or lodging, this license fee could cut into visitor spending in ways that are most likely to harm small, local businesses.
Hawaii already has some of the world’s highest tourism taxes,[2] and this is effectively another tax on tourism. As such, we can expect it to ripple through that industry in ways that might not worry larger companies, but could have a real impact on Hawaii’s economy anyway.
>> Resident benefits: Though pitched as a way to address the impact of visitors on our state, this licensing fee is more properly described as a funding source for environmental grants.
The revenues for this bill are not being used to fix roads, renovate the airports or even improve sanitation. The “visitor impact” to be addressed by this bill is not specific to visitors, but rather includes a broad range of objectives related to climate change, natural resources and the environment.
These might be worthy goals, but one must ask why a new source of funding must be created for them and why those revenues are not being used for a purpose with more immediate benefits to residents — such as infrastructure improvements, education, affordable housing or tax cuts.
In sum, this “visitor impact fee” program appears arbitrary, unfair, fiscally questionable and unconstitutional.
If Hawaii wishes to pull more money out of tourists to address the visitor impact on our state, the Legislature can always consider another increase in the transient accommodations tax. That would at least be easier to administer and would allow for more discussion regarding how those funds should be used.
As envisioned in this bill, the visitor’s license runs contrary to the spirit of aloha.
Thank you for the opportunity to testify.
Sincerely,
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] See, e.g., Crandall v. Nevada, 75 U.S. 35 (1867); Austin v. New Hampshire, 420 U.S. 656 (1975) (invalidating a “commuter income tax” applying only to nonresidents); and Metropolitan Life Insurance Co. v. Ward, 470 U.S. 869 (1985) (invalidating a law that taxed out-of-state insurance companies at a higher rate than in-state companies).
[2] Alison Fox, “These Cities — Including 3 in the U.S. — Have the Most Expensive Tourist Taxes in the World, Study Shows,” Travel + Leisure, Aug. 12, 2022.
