Johanna Jainchill
Johanna Jainchill

Insight logoThe Alaska Cruise Association on Friday filed suit in U.S. District Court in Anchorage seeking an injunction barring enforcement of the state's $46 head tax on cruise passengers.

The suit, which names the Alaska Department of Revenue as defendant, argues that the tax is unconstitutional because the revenue collected under the tax is spent for things other than cruise-related expenses.

As evidence that the head tax makes visitors pay for Alaska projects that are not related to cruise ship travel, the lawsuit cites $800,00 for improvements to the zoo in Anchorage and $1 million for the Morris Thompson Cultural and Visitors Center in Fairbanks, which lies about 400 miles from the closest cruise port.

The organization that sponsored the bill in 2006, Responsible Cruising in Alaska, has also expressed concerns about how the tax revenue is used.

In a letter to then-Gov. Sarah Palin last April, Responsible Cruising in Alaska president Chip Thoma listed several projects that the group felt were not "consistent with applicable state and federal law" put into effect by the initiative.

"We believe that the revenues derived from the various taxes passed via the 2006 initiative should, to the greatest extent possible, be spent on projects and activities that have a strong nexus with cruise ships and cruise ship passenger activities," Thoma said.

An example of a projects Thoma found that "may be inconsistent with the stated purposes of state law" were the Visitors Center in Fairbanks and improvement to a park in Kodiak.

Projects Thoma found were meritorious of the funds were a million-dollar cruise ship mooring buoy system in Hoonah and $2.5 million cruise ship dock improvements in Juneau.

"The basic rule of thumb developed during more than a decade of advocating for useful cruise related projects in Alaska comes down to this: 'Build a wharf or other infrastructure as close to a wharf as possible,'" he wrote to Palin. "This has proven to be an effective filter for evaluating the many proposals when there is competition for scarce capital funding."

The question then, is why the legislature, which in Alaska has the power to appropriate those funds, allowed so many projects to be funded that were not beneficial to the cruise passengers paying the taxes.

The answer may be that Alaska's state and local tax burden has consistently been the nation's lowest, according to the Tax Foundation, a nonpartisan Washington-based tax research group.

As the only state that does not collect either a state sales or income tax, Alaska depends heavily on its oil revenue. But oil revenue has been down, and with the passenger head tax bringing about $50 million in new money to state coffers in 2008 alone, state lawmakers were naturally eager to get their hands on whatever they could.

Even John Binkley, president of the Alaska Cruise Association, said last winter that it was likely to be "politically difficult" to successfully push the legislature for a repeal when the state's revenue totals had been "much less than they have been in the past."

Repealing the head tax on a constitutional basis is likely to be difficult. But at least the suit might force Alaska to follow the law about how the money is supposed to be spent, and give cruisers the peace of mind that their dollars went to building the infrastructure the cruise industry needs.


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