Key Takeaways:
- A federal judge has ruled that Hawaii’s new tourist tax, which includes a levy on cruise ship passengers, can take effect in 2026.
- The tax aims to generate nearly $100 million annually to help the state cope with climate change, including eroding shorelines and wildfires.
- The levy imposes an 11% tax on the gross fares paid by cruise ship passengers, prorated for the number of days the vessels are in Hawaii ports.
- The Cruise Lines International Association and other plaintiffs have challenged the tax in a lawsuit, arguing that it violates the Constitution and will hurt tourism.
- The plaintiffs plan to appeal the ruling and have requested an injunction pending the appeal.
Introduction to the Ruling
A federal judge’s ruling has paved the way for Hawaii to implement a new tourist tax, which includes a levy on cruise ship passengers, starting in 2026. The tax is part of a broader effort by the state to cope with the impacts of climate change, including eroding shorelines, wildfires, and other environmental problems. U.S. District Judge Jill A. Otake denied a request by the Cruise Lines International Association and other plaintiffs to stop the enforcement of the new law on cruises. This ruling is a significant development in the ongoing debate about how to balance the economic benefits of tourism with the need to address the environmental and social impacts of the industry.
The New Tax Law
The new tax law, signed by Hawaii Governor Josh Green in May, raises tax revenue to deal with climate change-related issues. The law imposes an 11% tax on the gross fares paid by cruise ship passengers, prorated for the number of days the vessels are in Hawaii ports. This tax is in addition to existing taxes on hotel room and vacation rental stays. The state estimates that the tax will generate nearly $100 million annually, which will be used to address climate change threats to the state. The law also authorizes counties to collect an additional 3% surcharge, bringing the total tax to 14% of prorated fares.
Challenges to the Tax
The Cruise Lines International Association, along with a Honolulu company that provides supplies and provisions to cruise ships and tour businesses out of Kauai and the Big Island, challenged the tax in a lawsuit. The plaintiffs argued that the new law violates the Constitution by taxing cruise ships for the privilege of entering Hawaii ports. They also claimed that the tax would hurt tourism by making cruises more expensive. The lawsuit notes that cruise tourism generates nearly $1 billion in total economic impact for Hawaii and supports thousands of local jobs. The plaintiffs are concerned that the tax will have a negative impact on the industry and the state’s economy.
Response to the Ruling
The state of Hawaii will continue to defend the law, which requires cruise operators to pay their share of transient accommodation tax to address climate change threats to the state. State Attorney General Anne Lopez stated that the law is necessary to ensure that the tourism industry contributes to the state’s efforts to address climate change. The U.S. government intervened in the case, calling the tax a "scheme to extort American citizens and businesses solely to benefit Hawaii" in conflict with federal law. The plaintiffs have announced that they will appeal the ruling and have requested an injunction pending the appeal.
Implications of the Ruling
The ruling has significant implications for the tourism industry in Hawaii and beyond. The tax is the first of its kind in the United States, and it may set a precedent for other states to follow. The ruling also highlights the ongoing debate about the role of the tourism industry in addressing climate change. While the industry generates significant economic benefits, it also contributes to greenhouse gas emissions and other environmental problems. The tax is an attempt to balance these competing interests and ensure that the industry contributes to the state’s efforts to address climate change.
Conclusion
In conclusion, the federal judge’s ruling allows Hawaii’s new tourist tax, including a levy on cruise ship passengers, to take effect in 2026. The tax is part of a broader effort by the state to cope with the impacts of climate change, and it has significant implications for the tourism industry. While the plaintiffs have announced that they will appeal the ruling, the state of Hawaii will continue to defend the law. The outcome of the appeal will be closely watched, as it may have significant implications for the tourism industry and the state’s efforts to address climate change.