AG: State has strong case in head tax suit

'The law allows for the user of such service to pay their fair share of what the costs are'

Posted: Friday, November 06, 2009

Attorney General Dan Sullivan told the Legislature on Thursday that Alaska has a strong case to defend itself against the cruise ship industry's legal attack on the head tax.

The Alaska Cruise Association filed suit challenging the constitutionality of the $46 per person tax on visitors to the state on large cruise ships. An additional $4 that pays for environmental monitoring is not being challenged.

The voter-approved head tax the industry is challenging under tonnage and commerce clauses of the U.S. Constitution is clearly legal, he said. Those clauses bar such things such as taxing commerce because it is interstate commerce.

"It is well established under the U.S. Constitution, whether the commerce or tonnage clauses, the law allows for the user of such service to pay their fair share of what the costs are," Sullivan said.

Defending Alaska's tax may depend on whether the head tax is tied to actual costs, and the state has begun a study to document that, he said.

Finance Committee Co-Chair Mike Hawker, R-Anchorage, said the tax money doesn't have to be spent only on direct costs such as docks and harbors.

Sullivan agreed.

"We believe that the law would allow, anywhere there is a large number of passengers from the cruse ships, to provide services in those areas, it is not just in the ports," he said.

Former Gov. Sarah Palin vetoed some cruise ship head tax expenditures on items directly linked to the ships, while approving less related expenditures such as an Anchorage convention center. Those vetoes were overturned by the Legislature last summer.

Sullivan said the head tax expenditures don't have to be exact, but they should be close.

"That doesn't have to be a perfect fit under the law, but it does have to be in the ballpark," he said.

Despite the lawsuit, Sullivan began by praising the cruise ship industry, which brings about a million visitors a year to Alaska.

"I want to increase tourism in Alaska, that goes without saying," Sullivan told the House Finance Committee.

He noted the industry had sued the state, not the other way around.

"I do want to emphasize there is great respect for the cruise ship industry in terms of the broader effects on our economy," he said.

Hawker asked Sullivan if the Department of Law would need an appropriation from the Legislature to fund the litigation. Sullivan said the next year's budget request is still being developed.

• Contact reporter Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com.



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