House committee shows little support for $100 cruise ship tax

Posted: Wednesday, January 28, 2004

A proposed $100 cruise ship head tax hit a storm of opposition in its first hearing Tuesday.

And House Speaker Pete Kott, an Eagle River Republican, said a less expensive $5-per-day passenger cruise tax proposal by Gov. Frank Murkowski also could face rough seas.

Rep. Carl Gatto, a Palmer Republican, introduced House Bill 207 last year. He said the cruise lines pay no state income taxes on their cruise profits, and they need to start pitching in since the state is facing a budget deficit of about $400 million.

"We have a lot of bills to pay and we're asking you to do your share," Gatto said.

But all the testimony before the House Special Committee on Economic Development, International Trade and Tourism was against the bill.

Cruise lines and small tourism businesses said the extra cost would discourage passengers from coming to Alaska and would leave those who do come with less money to spend on trips within Alaska. An estimated 776,000 people cruise to Alaska each year, according to the state Department of Revenue.

Research by an industry group, North West CruiseShip Association, indicates nearly half of potential Alaska cruise passengers might change their plans if a tax was in place, said Tom Dow, a spokesman for Carnival Corp.

"Nobody has to take a vacation," Dow said. "Nobody has to take one to Alaska. There are a lot of other choices that are closer and cheaper."

Gatto disputed that, saying he had polled cruise passengers on the docks in Juneau and on an airline flight. Nearly all said it would make no difference in their decision to visit Alaska, and many said the state deserved the $100, he said.

"They consider this the best destination in the known universe," Gatto said. "This state is giving them the experience of a lifetime."

Susan Burke, a lawyer for the cruise ship association, said the tax probably would violate provisions in the U.S. Constitution dealing with interstate commerce and interstate travel.

Courts have permitted only relatively small fees to defray costs at harbors and for other services used directly by the ships and their passengers, Burke said. Spending the money on roads or schools would not pass muster, she said, adding that an opinion by the Legislature's own lawyers indicated a cruise tax could face challenges.

But Gatto said the state Department of Law has concluded that a cruise ship tax could be legal as long as it's used to recoup related government expenses.

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