2002-02-13                     Senate Journal                      Page 2176
SB 290                                                                                            
SENATE BILL NO. 290 BY THE SENATE RULES COMMITTEE                                                   
BY REQUEST OF THE GOVERNOR, entitled:                                                               
                                                                                                    
                                                                                                    

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             "An Act relating to taxes regarding certain                                            
             commercial passenger vessels operating in the state;                                   
             relating to apportionment of business income; and                                      
             providing for an effective date."                                                      
                                                                                                    
was read the first time and referred to the Transportation, State Affairs                           
and Finance Committees.                                                                             
                                                                                                    
The following fiscal information was published today:                                               
 Fiscal Note No. 1, Department of Revenue                                                           
                                                                                                    
Governor's transmittal letter dated February 11:                                                    
                                                                                                    
Dear President Halford:                                                                             
                                                                                                    
The cruise ship tax I propose in this legislation is part of a three-year                           
sustainable budget plan designed to help fill Alaska's $1.2 billion                                 
budget gap. Failure to act this year to address this gap threatens                                  
Alaska's economic good health and the jobs Alaska's families depend                                 
on.                                                                                                 
                                                                                                    
This cruise ship tax is part of my year-one proposal to raise $400                                  
million in new revenues in each of the coming three years. The other                                
revenue elements in this first year are a reinstatement of a tax on                                 
income earned in Alaska and an increase in Alaska's tax on alcohol.                                 
                                                                                                    
Every year Alaska welcomes more than 600,000 visitors to our state to                               
tour Alaska's pristine waters on cruise ships. Our visitors enjoy the                               
amenities we offer: clean air and water, a safe and healthy setting, and                            
a supportive business environment.                                                                  
                                                                                                    
The vast majority of the companies operating cruise ships we welcome                                
here pay no tax to Alaska, to any other state, or to the federal                                    
government on their income from cruise ship operations. A tax based                                 
on the number of cruise ship passengers imposes the least                                           
administrative burden on the industry.                                                              
                                                                                                    
A small tax on visitors who stay overnight on a cruise ship is a                                    
reasonable way for a state to recoup some of its expense in                                         
maintaining the infrastructure that helps serve the visitor industry. The                           

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tax proposed in this bill, $30 per visitor who stays overnight in Alaska                            
on a passenger vessel, is comparable to a hotel bed tax. Indeed, it is a                            
smaller percentage than the bed tax charged per night in many visitor                               
destinations.                                                                                       
                                                                                                    
This tax would apply to all passengers who stay overnight in Alaska                                 
on commercial vessels. It exempts government-owned vessels, such as                                 
the state ferries and military vessels, because these vessels are in a                              
different industry and the government already contributes to the state                              
infrastructure. It does not apply to vessels with less than 12 berths                               
because these vessels are not in the cruise industry. In sum, it is a                               
broad-based nondiscriminatory tax.                                                                  
                                                                                                    
Some oppose a passenger tax because they argue it is unconstitutional,                              
yet my Administration is confident this measure is constitutional. I                                
have included a fair share protection provision in the bill, however,                               
that would impose a corporate income tax on the same vessels should                                 
the passenger tax be struck down.                                                                   
                                                                                                    
I urge your prompt and favorable consideration of this legislation.                                 
                                                                                                    
Sincerely,                                                                                          
/s/                                                                                                 
Tony Knowles                                                                                        
Governor