No New Taxes For Maui Car Rental In 2025

May 1, 2025. New car rental taxes for Maui and other islands remain in limbo as the Hawaii Legislature closes its 2025 session without voting on Senate Bill 1659. This bill proposed new rental car taxes to pay for revenue bonds to be issued for funding an extension of the Lahaina bypass highway in Maui. We covered this bill when it was introduced in January of this year, in a blog post titled New $3/Day Rental Car Fee For Maui Being Considered By Hawaii State Legislature.

WHY WAS THE BILL ABANDONED?

Legislators could not agree on the amount of the tax - the amended bill that made it out of committee left blank the dollar amount of the daily tax. They could not agree on the term of the tax, initially proposed for 10 years but later recommended to be extended to 30 years.

The bill faced other issues. In public testimony that went on the record, the Hawaii Department of Transportation questioned the sustainability of the bill's structure, and the Department of Taxation stated that it had no mechanism for collecting or earmarking the new taxes being proposed. The bill was likened to others that the Tax Review Commission found to be a “departure from Hawaii’s sound fiscal policies and should be avoided,” and the Hawaii Tax Foundation found that the bill "creates a bypass not of Lahaina traffic, but of the legislative budgeting and appropriation process."

At the close of the legislative session, there was no final report on the status of the bill. It has languished without any reported action and without being submitted for a vote since February 14, when the Senate Committee for Transportation, Culture and the arts referred it to the Senate Ways and Means Committee.

HOW WILL THE STATE PAY FOR THE NEW HIGHWAY?

In the end, the state may have to find a way to fund the construction of the new highway just the same way it funds every other highway construction project, out of its existing revenues for the State Highway Fund, and without relying on any new rental car taxes and fees for Maui or other islands. Revenue sources include multiple taxes and fees related to vehicle usage, such as fuel taxes, vehicle registration fees, and vehicle weight taxes, as well as rental motor vehicle surcharges, tour vehicle surcharges, periodic motor vehicle inspection fees, and other numerous sources of income including interest on deposits, penalties for vehicle weight tax violations, rental income from State Highway System properties, overweight permits, and sales of surplus lands.

WAS THE NEW PROPOSED TAX REALLY NECESSARY?

Did anyone seriously think that this bill was necessary? Some question whether this bill, introduced by a representative of the Lahaina district, and deemed by many observers as dead-on-arrival, was a political move intended to curry favor with constituents and capitalize on anti-visitor sentiment. The only support for the bill in the public record came from citizen groups whose testimony cast tourism as a "high-impact industry" to be taxed in proportion to its purported out-size use of public resources.

However, according to a frequently referenced report by the Maui Economic Development Board, these high-impact users are already high-impact contributors to the island economy, accounting for 70% of every dollar generated on the island. More realistically, according to a County of Maui Revenue Overview, tourism accounts for approximately 40% of the island's GDP, making it the largest sector of the economy, well ahead of other sectors including construction, education, retail, agriculture, and technology.

Tax levies on tourism already includes a significant tax on visitor rentals known as the Transient Accommodation Tax - that local property owners do their absolute very best to avoid paying - and existing rental car taxes, that can already account for a substantial proportion of the cost of renting a car. In a previous blog post on Maui Car Rental Taxes and Fees, we noted that mandatory taxes and fees can add about 50% to the base cost of rental, whether the rental is made at the airport or at an off-airport location. To give an idea of how much this contributes in revenue to state and local governments, Enterprise Mobility - the operator of Enterprise Rent-A-Car, Alamo Rent-A-Car, National Car Rental, and Enterprise Commute (Van Pool) - noted in its testimony submitted to the Senate Committee reviewing the bill that "while rental cars only comprise about 5% of the total vehicles in the State, the rental car surcharge accounts for 32.4% of the revenue in the highway fund."

WHAT HAPPENS NEXT?

In many cases, the old adage is that "no news is good news." Does that hold when it comes to this bill? Right now there is no information about the current status and future of the bill. This could mean that the bill has died a quiet death. Or it could mean that the bill will be revived in some revised form in future legislative session. Only time will tell.