Parnell pursues slashing cruise tax

Elizabeth Bluemink

Gov. Sean Parnell on Friday proposed cutting the tax voters imposed on cruise-ship passengers by 25 percent.

In return for the tax cut, cruise-ship executives have agreed to drop their federal lawsuit to repeal the tax and send more ships to Alaska, he said.

The agreement was forged during a roundtable discussion between Parnell and about a dozen cruise-line executives in Miami on Tuesday, according to people who attended the meeting.

The tax rollback is a reaction to the cruise lines' decision to pull ships from Alaska this summer, which has caused some Alaskans to lose work, the governor said.

The governor's proposal, which must be approved by the Legislature, would reduce the tax from $46 to $34.50 per passenger. Alaska voters approved the $46 tax in 2006.

That dollar reduction isn't arbitrary, said John Binkley, who heads the Alaska Cruise Industry Association, which has been fighting the state in federal court over the legality of the passenger tax.

Cutting the tax to $34.50 is a way to remove the 25 percent portion of the tax that cannot be spent in Alaska port communities and is dedicated to spending on infrastructure projects in other parts of the state. The cruise lines have been arguing in court that those appropriations are illegal, Binkley said.

It's unclear for now whether the Legislature will reduce the head tax in an election year. Former House Speaker John Harris, a Republican from Valdez, said he thinks some legislators will support the governor's proposal, but he isn't sure if it will muster the votes needed to pass. Harris pointed out that legislators have already amended the cruise law two or three times.

Cruise ship watchdogs in Juneau said they are not opposed to reducing the passenger tax, but they think the reduction needs to be fully justified and it might be too late in the legislative session to get a full airing. The Legislature is scheduled to adjourn for the year on April 18.

"It's probably the 13th stroke of the clock," said Joe Geldhof, one of the sponsors of the 2006 ballot initiative that created the passenger tax and a slew of other new taxes and environmental rules for large cruise ships.


The passenger tax has generated roughly $38 million per year over the past few years, according to state records.

Parnell's announcement comes almost a year after the state's largest cruise lines began announcing that they would pull some of their ships from Alaska this year. The state now expects about 140,000 fewer cruise passengers this year as a result.

The cruise lines dominate the state's tourism industry, bringing nearly 1 million passengers per year. They claim the state is getting too expensive to operate. Parnell said he went to Miami in an effort to try to restore jobs to Alaskans who have been hurt by the cutbacks.

Ever since voters approved the law, the cruise line and Alaska tour operators have begged the state to reduce or eliminate the passenger tax, and loosen the cruise law's environmental requirements.

Cruise line critics, however, say that the national recession -- not the passenger tax -- is to blame for the reduced number of cruise ship visits to Alaska.

Calling it a "one-two punch," Parnell said he thinks the U.S. recession and the tax have both harmed Alaska's tourism industry.


Parnell returned from Miami this week and announced his proposal Friday during a Resource Development Council luncheon in downtown Anchorage.

Parnell was invited to attend the meeting by the Alaska Alliance for Cruise Ship Travel, a group composed mainly of Alaska companies that depend on spending by cruise passengers in Alaska.

Parnell said he learned during the Miami meeting that Alaska has the highest cruise passenger tax in the world.

He plans to ask lawmakers to combine his proposal with pending legislation to give an income tax credit to companies that contribute to the state's tourism marketing campaign. That campaign is run by the Alaska Travel Industry Association, a trade group.

Harris, the Valdez lawmaker, said he's not sure that the bill for tourism tax credits will pass this year. He said some legislators don't like that it appropriates money to an organization that is not supervised by the Legislature.

But the governor, who favors the tourism tax credits, said Friday that cruise tax reductions are not enough to restore the state's tourism industry.

The state also needs to boost its tourism marketing and ease its regulatory requirements for the cruise ships, Parnell said. For now, he has not proposed any regulatory changes.

Find Elizabeth Bluemink online at or call 257-4317.