2002-02-13                     House Journal                      Page 2234
HB 412                                                                                            
HOUSE BILL NO. 412 by the House Rules Committee by request of                                       
the Governor, entitled:                                                                             
                                                                                                    
     "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 note(s) apply:                                                                 
                                                                                                    
1.  Fiscal, Dept. of Revenue                                                                        
                                                                                                    
The Governor's transmittal letter dated February 11, 2002, appears                                  
below:                                                                                              
                                                                                                    
"Dear Speaker Porter:                                                                               
                                                                                                    
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.                                                                                                 
                                                                                                    

2002-02-13                     House Journal                      Page 2235
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 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.                                                                   
                                                                                                    

2002-02-13                     House Journal                      Page 2236
I urge your prompt and favorable consideration of this legislation.                                 
                                                                                                    
                                Sincerely,                                                         
                                /s/                                                                 
                                Tony Knowles                                                        
                                Governor"