Holland America Officer James Griffiths briefs guests aboard the Ryndam during a tour in Juneau. Listening in are, from left, Sen. Dennis Egan, Ashley Johnston and Tricia Sine.

By Kate Golden

The U.S. Supreme Court has slapped down the city of Valdez’s tax on oil tankers, which may have legal implications on the state’s $46 tax on cruise ship passengers. Both sides of the state’s cruise ship fight said the decision could be relevant to cruise lines’ quest to undo the head tax.

“I don’t think it’s a stretch,” said John Binkley of the Alaska Cruise Association, the industry’s lobbying group here. “I think the 7-2 decision by the Supreme Court has certainly strengthened the Tonnage Clause of the Constitution. And I believe it will make the state’s cruise ship passenger head tax even more vulnerable to challenge.”

Such a challenge could come from passengers as a class-action lawsuit or from one or more cruise lines, Binkley said.

Cruise lines have been fighting the head tax since voters mandated it in 2006 ballot initiative, which also included the creation of $4 per passenger berth fee often lumped in with the $46 excise tax. The cruise lines argue the head tax hurts business by deterring price-conscious potential passengers.

Last year, the state collected $46.8 million through the tax based on 1 million passengers. It’s supposed to be used on port and harbor improvements or cruise-ship-related services in ports of call.

The tax came in a package of reforms, including much stricter wastewater limits, that the cruise lines have also fought.

Valdez’s now-unconstitutional tax targeted boats at least 95 feet long in such a way that it only really applied to large ships, mostly oil tankers. Polar Tankers, a ConocoPhillips subsidiary, argued that this amounted to a tax just for the privilege of entering the port – a constitutionally forbidden “Duty of Tonnage.”

The Supreme Court agreed. The Tonnage Clause was designed to keep states from effectively taxing each other, and from taking advantage of their geographical location, Justice Steven Breyer wrote in a three-justice plurality opinion.

Breyer wrote that the clause means states also can’t tax the size of the vessel indirectly by targeting something else – “the number of masts, or of mariners, the size and power of the steam-engine, or the number of passengers which she carries,” he wrote, citing an 1849 case. He argued the Valdez tax did just that.

Binkley said the Tonnage Clause “would be one of the primary aspects of any case,” because the head tax effectively singles out cruise ships and their passengers.

The Legislature hasn’t undone the head tax, so “perhaps the courts will have to decide this issue as well,” Binkley said.

On the other side of the issue, Joe Geldhof, a Juneau lawyer who co-wrote the 2006 ballot initiative, also thought it likely that the Polar Tankers case would inspire the cruise industry.

“Having read the case, I believe there will be a lot of chatter all over Alaska that the excise tax on cruise passengers is somehow illegal or unconstitutional,” he said.

And he thought it possible the Supreme Court could eventually strike down the head tax, though he qualified it as unlikely. A challenge wouldn’t stand up in court, he argued, because the head tax targets passengers and not the ships themselves.

Source: Juneau Empire

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