Cruise head tax still in play

Industry poll shows some tourists would cancel if made to pay another $50

Posted: Friday, November 02, 2001

The cruise ship industry says a state $50 passenger head tax would be especially harmful in the aftermath of Sept. 11.

But the leading supporter of that tax, Senate President Rick Halford, said that so far he doesn't see any reason to back off.

A $50 head tax would bring in $35 million if levied on 700,000 passengers, the industry's cabin capacity in Alaska next year.

It's the most popular proposed tax in Alaska, according to a recent poll for the House Republican majority. About 65 percent of respondents in an October survey favored the tax, more support than pollsters found for any other revenue-raising option.

The industry has countered with a poll showing that 10 percent of potential passengers wouldn't make the trip if the cost was increased $100 per cabin. That dollar figure was used because cruise ship voyages generally are booked for two people, according to Dennis Brandon of Cook Inlet Regional Inc., who presented the survey results to the Alaska State Chamber of Commerce convention this week.

"A $50 head tax on present prices is a lot - a heavy burden," said John Hansen, president of the North West CruiseShip Association. Some seven-day Caribbean cruises are selling for under $500 now, he said.

The cruise ship association used a Washington, D.C., pollster to measure sentiment among 1,200 people who had contacted the Alaska Travel Industry Association about vacationing in the state. The poll, taken in May, screened out people who said they weren't likely to visit.

Along with the 10 percent who said the head tax absolutely would kill their cruise plans, another 38 percent of respondents said there was some chance they wouldn't go.

Almost half, 48 percent, said the price increase wouldn't influence them.

But losing even 10 percent would hurt local businesses that depend upon the traffic, Brandon said. More than three out of four potential passengers said they would take fewer or no shore excursions due to the tax, according to the poll.

As for the industry, the value of cruise lines has dropped from 30 percent to 60 percent since the terrorist attacks, with two companies already filing for bankruptcy protection, Brandon said. This typically would be the peak of the booking season for 2002, but travelers are holding off on making plans, he said.

Joe Geldhof, a Juneau attorney who was co-author of the successful $5 city head tax initiative, said using the terrorist attacks as a reason not to tax the industry is "the phoniest kind of straw man argument."

No one is suggesting tax cuts for Alaska businesses that have had increased security costs since Sept. 11, Geldhof said. "I think it's delusional."

Halford pushed for a $10 head tax during a special session of the Legislature in June. Although a $50 tax had passed the Senate in 2000, this time senators rejected the smaller amount by 10-9. Afterward, Halford said the industry would end up wishing the head tax was only $10.

On Thursday, the Chugiak Republican said he would have to be convinced the industry can't afford to pay the tax post-Sept. 11.

"That may be a legitimate question," he said. "It may be that their business may increase because of the relative security (of Alaska). Alaska may look better in the near future than it has in the past."

In fact, the number of large, foreign-flagged ships coming here will increase in 2002 as cruise lines leave the Middle East and the Mediterranean, Hansen confirmed. Twenty-five ships owned by association members will ply Alaska waters, up from 22.

Halford said he will investigate what cruise lines must pay in non-Alaska ports.

"We're going to get more information, obviously, on comparisons - both head taxes and tonnage taxes," he said. Using $100 rather than $50 in the industry poll is "a ruse," he said. "That is not a fair question."

But in the context of a long-range fiscal plan for the state, a cruise tax is going to remain popular, Halford said. It offsets revenue that otherwise might have to come from taxes or Alaska Permanent Fund earnings as the state struggles to balance its budget, he said.

Although a proposed statewide ballot initiative levying the head tax has been withdrawn, it's not necessarily dead, said Geldhof, who assisted in the drafting. If the Legislature fails to tax the industry in the 2002 session, the initiative will be back, he predicted.

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