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Alaskans vote: Tax the tourist?

Posted by Anita Dunham-Potter On July - 24 - 2006

The scenes are breathtaking: blue glaciers, gigantic snow-capped mountains and soaring bald eagles. They are picture-perfect images of Alaska, and tourists love them. But are cruise visitors willing to pay more taxes for the experience? Some political and environmental activists in Alaska say, “Yes.”

On August 22, Alaska voters will go to the polls to vote on Ballot Measure 2, more commonly referred to as the “cruise ship tax,” a proposal to significantly increase taxes on cruise lines and their passengers vacationing in the state. If the measure passes, it could add hundreds of dollars to every passenger’s cruise bill. The measure has divided the electorate and is being closely watched by cruise lines, tour operators and their employees, who vehemently oppose it.

Thank you for visiting, now pay up

Ballot Measure 2 qualified for the August 22 ballot when California-based environmental group Bluewater Network gathered the necessary number of signatures from Alaska voters. The measure is also sponsored by Responsible Cruising in Alaska, a Juneau-based group; the Campaign to Safeguard America’s Waters, an Alaska-based project of the Earth Island Institute; and Karen Jettmar, director of Equinox Wilderness Expeditions.

The goal of the initiative, sponsors say, is to protect Alaska’s water quality, fisheries, port communities, and maritime infrastructure and to establish what they call a “fair taxation policy.” At the core of Ballot Measure 2 is a group of four tax measures:

* The first measure would impose a $46 tax on every cruise passenger to improve port and harbor facilities and to support commerce and regional tourism.
* The second measure would impose an additional $4 tax on every cruise passenger to cover the cost of an “Ocean Ranger” on each ship to monitor emissions.
* The third measure would impose Alaska’s 33 percent gambling tax on cruise ships’ gambling operations while in state waters.
* The fourth measure would subject cruise lines to state corporate income tax.

The head tax has been proposed before, most recently in 2002 when former governor Tony Knowles unsuccessfully called for a $30 head tax to help balance the state’s budget. According to the North West CruiseShip Association, if the head tax passes this time, Alaska will become the only state in the union to charge people for visiting.

“Trojan horse” provisions

“This measure is nothing more than a special interest effort to attack Alaska’s economy,” says Robert Scherer, owner of the Great Alaska Lumberjack Show in Ketchikan. Scherer points out that Alaska businesses have thrived since the cruise industry expanded its operations in the state.

Scott McMurren, publisher of the Alaska Travelgram and “The Great Alaskan TourSaver” and a weekly travel columnist at the Anchorage Daily News, says the initiative is a classic case of taxing the other guy, and he disputes the suggestion that the cruise lines neglect the environment. “When it comes to environmental standards, cruise ships have higher wastewater standards than the state’s ferries and many coastal communities in southeast Alaska,” McMurren says. He calls the bill a “Trojan horse” full of provisions that create more government bureaucracy and a lot of collateral damage.

Indeed, the “Ocean Rangers” provision would create a new state jobs program, a program that would be redundant since it would duplicate the work of the Commercial Passenger Vessel Compliance Program, a state environmental initiative that is already funded by the cruise lines. And it is true that Ballot Measure 2 contains some very odd provisions. One would require the cruise lines to disclose any markups or commissions they receive when passengers book a shore excursion through the cruise line. McMurren sees this as an attempt to encourage passengers to book excursions direct from the local tour operator, and he worries that this practice could result in visitors unwittingly hiring tour operators who do not carry the mandated liability insurance.

Scherer is equally perplexed by the disclosure provision. “It goes against basic free-market principles,” he says. “This would be similar to walking into a store and seeing the price the store paid and the price you as the consumer pays.”

Another disturbing section of the bill would allow Alaskans to report violations of the law and receive up to 50 percent of any fines collected. Worse, when citizens succeed in collecting the money, they would have to split it 50-50 with the lawyers who file the suit. “Clearly, this is an incentive for frivolous lawsuits against cruise lines,” McMurren says. “There’s something in the bill for everyone to hate — except lawyers, who authored the bill.”

Organized opposition

Ballot Measure 2 is opposed by hundreds of Alaska’s town and city governments, chambers of commerce, civic organizations, visitors bureaus, tour operators, tourist associations, small businesses and large business from airlines to cruise lines. Some of these groups have financed a campaign to defeat the measure through the North West CruiseShip Association; their Web site, called Protect our Economy, summarizes many of the arguments against the measure.

Scherer sums it up this way: “Alaskans have a tremendous history in this [cruise tourism] industry and it epitomizes our frontier spirit. It is an industry that cares about our pristine environment and creates revenue from that exact resource. We self-regulate and have nothing but success stories.”

Love and hate tourists

Others disagree. In a statement of support for the measure filed with the Alaska Division of Elections, Gershon Cohen and Joe Geldhof, of Responsible Cruising in Alaska, wrote, “The cruise lines are ‘selling’ Alaska while impacting our docks, roads, public facilities, wildlife, and the quality of our lives. This initiative will do nothing to turn visitors away; it will help keep our tourism industry sustainable while protecting the needs of all Alaskans.”

I dispute this assertion. It is the cruise tourists who will bear the burden of the ballot measure, and they will not bear it lightly. They will pay head taxes directly, and they will pay the casino taxes and the corporate taxes indirectly, because the cruise lines will pass these costs on to the customer. As a recent cruise tourist to Alaska, I can tell you that Alaska is by no means a budget vacation. I spent thousands of dollars in the state on top of the cruise fare and port taxes. Cruise travelers are very cost-conscious consumers, and the more they pay in taxes, the less they will spend in port. That is the core argument for many who oppose the bill.

If the bill passes, it won’t kill Alaska cruising, but it will hurt both the cruise industry and Alaska tourism. Cruise tourism currently accounts for 70 percent of all Alaska tourism, so any burden placed on the cruise lines will have far-reaching consequences.

Alaska voters need to think long and hard. Alaska is a beautiful state, but it isn’t the only place in the world where you can get up close to glaciers and wildlife. Ships are moveable objects, and if the cruise lines can find a better value for the consumer elsewhere, the ships will set sail for the horizon.

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