My Turn: Reduced head tax offers 'tourist-friendly' image

Posted: Monday, April 19, 2010

The "State Head Tax" initiative was narrowly approved by 52 percent of voters in the 2006 primary election. Many voters erroneously thought communities could spend this as "free money" however they wished.

During the three years since its inception, money has been spent on a number of projects that do not appear to meet legal muster. Further, many projects last year were of such doubtful legality that they were vetoed by former Gov. Sarah Palin. There remains substantial doubt as to the legality of charging any "head taxes" because ships are already charged port tonnage fees, etc.

The tax seems discriminatory since it only is charged to tourists arriving on big ships. The cruise industry, experiencing lower demand, filed suit. With a substantial reduction of this tax, the industry has agreed to withdraw the lawsuit. This is a good deal because "half a loaf" is better than nothing.

Passengers during my summer whale-watch tours often inquire about this tax, as they view it as "anti-tourist" and "greedy." Alaska is the only state with neither Income tax or sales tax, though residents get an annual Permanent Fund dividend check.

My business collects sales tax and passes this money on to the CBJ. Similarly, the cruise lines pass the head tax on to the individual tourists traveling to Alaska. Any business entity, large or small, must pass expenses on to the customer.

The negative impact of the decrease in bookings by cruise ships traveling to Alaska is easily solved by moving excess ships elsewhere.

The negative impact of fewer tourists arriving here is not as easily solved. Tourism is Juneau's second biggest industry. For those of us who live here, we cannot simply move local tourism investments elsewhere. The only major expense we can reduce is employment. Less tourism spending means less wages earned locally. This obviously impacts other areas of our economy.

Opponents to reducing the tax reportedly regard the $46 head tax to be pocket change. For many visitors, that may well be true. Along that line of thought, why not bill each $100? Why not bill the smaller cruise lines, where tickets price for a mid-summer cruise is $4,800? Why not charge ferry passengers (non-Alaskans) the tax? (They pay nearly $600 per passenger with a two-berth cabin). Don't visitors coming aboard the ferries or smaller cruise ships have any impact on Alaskan ports of call?

I suggest that for a family of modest means who carefully budget their dollars, the head tax is significant. For such a family booking an inside cabin on a large cruise ship, the tax is $260, or about 15 percent of the fare.

Opponents to reducing the tax argue passenger counts are down due to the downturn in the economy. If this were the only factor, why is there an increased demand to competing cruise destinations? The cruise lines aren't leaving ships tied up to the dock. They are re-deploying to different venues where they can enjoy better profits.

The three Anchorage Senators who voted against the bill (including one running for governor) wanted a guarantee by the cruise ship industry that they'll send more ships back to Alaska. They miss the fact that the cruise ship industry - as with all businesses large and small - can only survive if they have enough customers. It's the old law of supply and demand. Without the demand, the industry is not going to increase the number of ship sailing here. If and when demand returns, so will ships carrying more passengers. It is that simple.

The initiative originally passed by a slim margin in 2006. Tourism numbers pretty much leveled out in during the last few years. This year's forecast is expected to see 142,000 fewer passengers. Meanwhile, Alaska communities are having difficulty determining how to legally spend millions of dollars already collected. It makes no sense to tax for the sake of taxing.

Even if reducing the tax has only a small effect on passenger counts, it will help our tourism economy in these desperate times and provide a more tourist-friendly image to potential visitors. It also will have a positive effect on Alaska's small businesses throughout the State.

• Jack Cadigan is a Juneau resident, 26-year business retailer, eco-tour boat owner and operator, and retired Coast Guard captain.

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