Tax hike for cruise industry dropped amid Alaska concerns

Flag of Alaska (Photo by Wikimedia Common, CC0)

JUNEAU, Alaska — The cruise industry has dodged a tax increase after Alaska’s U.S. senators helped strike the provision from the tax bill that passed the Senate.

The bill approved early Saturday includes other provisions that Alaska Republican Sens. Lisa Murkowski and Dan Sullivan hailed as significant for Alaskans, including allowing oil and gas drilling on the coastal plain of the Arctic National Wildlife Refuge.

Murkowski called the package “a critical milestone in our efforts to secure Alaska’s future.”

The measure also would provide tax benefits for Alaska Native corporations to encourage contributions to trusts that promote the health, education and welfare of beneficiaries and to help the funds grow.

The cruise ship tax provision could have impacted tourism, a major driver of an Alaska economy that has otherwise slowed in a recession because of persistently low oil prices.

This summer, more than 1 million tourists came to the state on cruise ships, and the industry anticipates breaking that record during the 2018 summer cruise season, said John Binkley, president of Cruise Lines International Association Alaska, a trade group.

“It’s really one of the bright spots in the economy for Alaska, and I think Sen. Sullivan and Sen. Murkowski felt this would be another blow to Alaska’s economy if we tried to then restrict that growth or to slow down that growth in that sector,” he said.

The provision would have applied to foreign ships, assessing a corporate tax based on their time in U.S. waters, Binkley said. By one estimate, it would have raised $700 million over 10 years, though Binkley said there were no hearings to vet that estimate.

The tax increase would have applied to other U.S. ports as well. But ships operating in Alaska are in U.S. waters far longer than vessels leaving Miami for places such as the Caribbean or departing Los Angeles for Mexico, he said.

Critics feared the tax could have discouraged ships from routes where they would face higher taxes.

Sullivan and Murkowski said the tax would have disproportionately affected Alaska, particularly impacting communities that rely on cruise ship tourism. Sullivan lobbied Senate leadership and other lawmakers in getting the tax increase stripped from the bill, said Matt Shuckerow, a Sullivan spokesman.

The bill isn’t a done deal; the House and Senate passed their own tax bills and differences between the two need to be hashed out. The cruise ship tax, however, was not in the House bill, Shuckerow said.