Bob Stone, chairman of the Alaska Cruise Association’s (ACA) board of directors, told a special hearing of the House Judiciary Committee that the organization filed its entry fee challenge with reluctance and only after the companies unsuccessfully tried to work with legislators to make adjustments to the tax.

He called the tax, created by a 2006 initiative, improper and unwise because it is unconstitutional and discourages tourism in Alaska.

Steve Rummage, an attorney for ACA, said the prohibition against states imposing taxes on movement of people or goods moving between states are one of the founding principles of the Constitution.

“One of the central criteria for the founders was to avoid economic balkanization of the nation,” with states imposing fees and taxes on each other, Rummage said.

Alaska’s cruise passenger tax “is not some technicality. It goes to one of the core principles of the Constitution,” he told the committee.

The tax is discriminatory, he said. It applies only to large vessels with 250 berths or more which offer overnight accommodations. Smaller, day-cruise operators do not pay the tax, although these firms use the same docks and other port facilities that are improved with revenues from cruise passenger taxes.

Don Bullock, a staff attorney for the Alaska Legislature, agreed. He told the committee that the state ferry system operates two large vessels, the Kennecott and the Columbia, that accommodate more than 250 passengers in overnight accommodations. Ferry passengers do not pay the tax.

The cruise association told the committee that its members do not object to taxes and fees related directly to services provided to the ships and passengers, but do object to a tax that raises revenue for other purposes. Among the projects funded with entry fee receipts are animal facilities, state parks and a commuter train station in Wasilla.

Rummage said part of the problem is there are not enough appropriate projects to spend the $46 tax. “Most of the money is going to projects that can’t meet federal requirements.”

Joe Geldhof, one of the initiative sponsors, suggested escrowing the money until the legal issues are settled. “The real issue is how to appropriate the funds.”

The committee ended with an executive session to review the attorney general’s outline of the state’s legal strategy.

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