Hawaiʻi should end the loophole as Maryland did recently
Posted: February 20, 2026
The State House Education Committee on Thursday approved a proposal to end a multi-million-dollar tax loophole enjoyed by rental car companies in Hawaiʻi to fund hazard pay for teachers who put themselves in harm’s way by teaching children during the pandemic.
Legislation introduced in January proposes a pandemic bonus of $20,000 for eligible members of Bargaining Unit 05 who were employed at any time between March 4, 2020, and March 25, 2022.
“You’ve heard the stories from our teachers working so bravely during the pandemic, and now it’s a morale issue,” Hawaiʻi State Teachers Association President Osa Tui, Jr. told members of the House Education Committee hearing Thursday afternoon.
“You know you’re working in the same classroom as someone else who got $20,000 for their hard work and their efforts through the pandemic,” Tui said, referring to educational assistants who received hazard pay and worked in the same classrooms side-by-side with teachers, who received no hazard payments.
The HSTA is grateful to House Education Chair Justin Woodson and the committee’s Vice Chair Trish La Chica for hearing the proposal, which passed their committee following their recommendations, Thursday.
The proposal still must be heard by the House Finance Committee and crossover into the Senate, where it will have to go through multiple hearings again. So the measure has a long way to go before it could be signed into law by the governor.
Laverne Moore, a former McKinley High special education teacher who retired in 2024, testified Thursday in strong support of the bill in her capacity as HSTA-Retired Oʻahu district president.
“Our retirees served on the front lines during those two hectic years, teaching in person and online simultaneously, while maintaining all federal special education mandates, which kept the state from being sued by parents for not implementing their IEP (individualized education plans for students with special needs) meetings,” Moore said.
“Recently, our members shared that they feel forgotten. They feel as though their sacrifice during the height of the pandemic has been overlooked because they have moved to retirement. Because this compensation requires a specific funding mechanism, this legislative body is the only place where these educators can be made whole,” she said, noting that retirees no longer have an avenue to rectify the situation through collective bargaining.
The proposal “represents your chance to tell our educators, both active and retired, that their bravery was seen, and the state is going to compensate them for what they went through,” Moore added.
Hawaiʻi should join states like Maryland that have ended rental-car tax loopholes
The bill would end Hawaiʻi’s rental-car tax loophole, generating revenue to fund the pandemic pay bonuses and other government expenses. Not surprisingly, lobbyists for rental car companies oppose the measure.
Right now, any Hawaiʻi resident who buys a $48,907 car, the average transaction price, pays a retail general excise tax (GET) of 4%, about $1,956. In contrast, large rental car companies that make billions each year in profits use the tax loophole to treat the purchase as a wholesale business transaction. That means companies like Enterprise and Hertz can buy the same car and pay only 0.5% in tax, or roughly $244, equalling a $1,712 gap per vehicle.
Oregon, North Dakota, and Georgia have each repealed or narrowed their rental car tax exemptions. Maryland did the same through its Budget Reconciliation and Financing Act of 2025, imposing a 3.5% excise tax on rental vehicle purchases that had previously been fully exempt, and expects to raise roughly $240 million in additional revenue.
In written testimony, Robert Singleton, senior director of policy/public affairs for the western United States at Chamber of Progress, said, “These states have established a fairer tax system while redirecting recovered funds to essential public services. Hawai‘i can and should follow their lead.”
“The practical effect is that Hawaiʻi’s roads have become both a profit center and a tax shelter. Lawmakers can’t keep letting rental giants drive away with desperately needed revenue,” Singleton added.
Educators: pandemic pay is a ‘long-overdue acknowledgment of selfless service’
Teachers from across the islands submitted written testimony supporting the proposal to eliminate the tax loophole and fund pandemic payments for educators.
Briann Starkey, a teacher at Kualapuʻu Public Conversion Charter School on Molokaʻi, said, “This legislation honors the risks educators took by ensuring they are finally made whole for their service during the global crisis. The funding for this compensation correctly focuses on the visitor industry rather than taxing our hardworking local families. For too long, rental car companies have utilized a wholesale tax loophole for vehicles that are the core of their retail business.”
Brad Kusunoki, a teacher at Alvah Scott Elementary on Oʻahu, wrote, “While the world stayed home to mitigate risk, teachers returned to school buildings, often in poorly ventilated spaces with large groups of unvaccinated students, to ensure the continuity of our children’s education. This work was not just professionally taxing; it was physically and psychologically hazardous.”
“Many of us spent our own funds on PPE (personal protective equipment) and plexiglass while carrying the constant weight of potentially bringing a life-threatening virus home to our families. Providing hazard pay is more than just a financial gesture; it is a long-overdue acknowledgment of the selfless service and personal risks educators endured to sustain our community during its most vulnerable hour,” Kusunoki said.
Megan Medley, who teaches at ʻĪao Intermediate on Maui, said, “This measure recognizes the essential role educators played in keeping our communities functioning during a global crisis.”
“Reopening schools allowed parents and guardians to return to work, helping families regain financial stability and strengthening our broader community. Teachers made that possible by showing up each day despite the health risks and evolving challenges. They adapted instruction, implemented safety protocols, and supported students academically and emotionally,” Medley added.
During Thursdayʻs House Education Committee hearing, Kamakana Kaimuloa, government affairs manager for the United Public Workers union, testified against the measure.
“For the last four years, we’ve been fighting with both the DOE as well as the executive branch to resolve the THP (temporary hazard pay) grievances that we filed on behalf of our members back in 2022,” said Kaimuloa, whose union, UPW, represents blue-collar employees at public schools, such as custodians and cafeteria workers.
“It’s not about whether teachers deserve it or not; we believe they do. You’ll never hear us say otherwise. But we think that these contractual obligations should be resolved before THP is approved for the teachers,” he told House members.
The Hawaiʻi State Department of Education reached an agreement with UPW for 15% hazard pay for its blue-collar HIDOE workers, but never disbursed it last year as the department had promised, UPW State Director Kalani Werner told Honolulu Civil Beat. In a statement on its website, UPW said as of Feb. 2, “The employer has not provided an estimated payment date. They missed the previously agreed payment deadline, and the union is now pursuing the matter through legal channels.”
Tui, president of the teachers’ union, told representatives, “We stand with our UPW brothers and sisters who are waiting with the Department of Education to get their just rewards for this as well.”
Tui said HSTA doesn’t begrudge UPW, “as they have been waiting all these years for theirs.”
In December of 2024, the Board of Education approved $20,000 and $10,000 COVID-19 bonuses for 247 HIDOE employees who are excluded from collective bargaining agreements. Unlike classroom teachers, most HIDOE employees who received COVID bonuses did not work directly with students during the pandemic; instead, they worked from their homes, in offices, or in other areas with much lower health risks than in classrooms.
Tui testified that when HSTA went to lawmakers last legislative session with teachers’ request for hazard pay, “we were told to do our homework. Find a way to fund it. We did our homework,” proposing to end rental car companies’ tax loophole, which would bring in anywhere from $70 to $80 million a year to state coffers.
Gov. Josh Green submitted testimony on the House pandemic pay proposal in which he said his office “supports the concept of leveraging these revenues to provide additional financial support for teachers and recognizes the value of establishing a stable funding stream linked to this tax adjustment. Consideration of how these funds are utilized will help ensure they contribute to long-term workforce stability and positive outcomes for students and schools statewide.”
A similar measure in the Senate on revenue generation was referred this week to the Ways and Means Committee for scheduling a hearing.
The joint committees that previously heard the bill reported: “Your Committees note that there was testimony provided in strong support of this measure to apply additional tax revenues to address the Department of Hawaiian Home Lands beneficiary waiting list and to establish a Teacher Temporary Hazard Pay Special Fund. Your Committees respectfully request that these concerns merit further consideration as this measure moves through the Legislative process.”
Key state Senate and House committees last week advanced both the hazard pay proposal and a measure that would establish annual step salary increases for public and charter school teachers.