The plan would replace, and be a radical departure from the way the four counties now get revenues -- mostly through property taxes.
The sales tax would be different from the existing 4 percent excise tax because only an "end consumer product" sale would be taxed. An excise tax applies to transactions.
Also, a city sales tax, on top of the 4 percent general excise tax, could come with a host of key exemptions such as food, drug, medical services, other nonmaterial services and rent.
Harris spokeswoman Carol Costa and Budget Director Malcolm Tom said the administration needs to get more feedback before endorsing the concept.
Tom stressed that the mayor would only support a sales tax if the city would also eliminate real property taxes.
The supposition, however, is that the counties would also need to give back their share of the transient accommodations tax to allow the state to recoup the cost of its Waikiki convention center.
A state Senate bill that would allow the counties to impose a sale tax as early as Jan. 1, 1998, is still alive and now before the House.
Tom said the idea of studying a sales tax came from the Senate Tourism Committee, not from the mayor.
"We have been contacting various business and community leaders for their input and our preliminary analysis is that a sales tax would reduce taxes for the average homeowner and shift the burden to the tourist," Tom said.
He noted that more than 40 percent of retail sales comes from visitors.
Harris wants to look at a sales tax plan that is "revenue neutral" for the city, Tom said.
Tom refused to say under what circumstances the city would receive higher revenues from sales taxes when put up agains the current property tax system. "There are too many variables," he said.
But according to "discussion draft" papers obtained by the Star-Bulletin, the city would obtain $449 million under a 3 percent tax in fiscal 1998, $598 million under a 4 percent scheme.
In contract, the proposed budget for fiscal 1998 projects $392 million in property taxes and $47 million in TAT dollars.
Tom said that he wasn't keeping track of whether a majority of those he talked to about the plan were for or against it.
Resort-hotel owners and other major businesses with large property tax bills would be the major beneficiaries if the counties are allowed to swap property taxes for sales taxes.
The administration, in a draft proposal, said the switch would give incentive for new business investment.
Critics of a county-sponsored sales tax, however, say it would be a regressive tax and hurt consumers in lower-income brackets who normally don't own homes and therefore would not benefit from the elimination of property taxes.
Critics also question how much a sales tax would help even homeowners, because property and income taxes can be claimed as deductions from a resident's annual income tax returns. A sales tax could not.
"Perhaps that's why we're looking for more community input -- to determine the impact on different consumer segments of the community," Tom said.
Hawaii is one of 15 states that do not allow its cities or counties to impose a sales or excise tax.
There are neither state nor city sales taxes in Delaware, Montana, New Hampshire and Oregon.
The 15 states that don't allow their municipalities to charge an excise or sales tax are:
Of those, Delaware, Montana, New Hampshire and Oregon also don't impose excise or sales taxes of their own. Alaska imposes no excise or sales tax of its own, but allows its municipalities to do so.
Connecticut