An Act relating to taxes regarding certain commercial passenger vessels operating in the state; and providing for an effective date.

Alaska is facing, as are most states, the ever-escalating cost of funding state government. The Alaska State Legislature has held Fiscal Policy Caucuses, Ways and Means Committee meetings, and made proposals for new taxes. We have also considered the restructuring of current revenue sources and uses. Part of the solution to funding state government involves industries paying reasonable compensation for services rendered and received.

Sales taxes, income taxes, as well as user fees, primarily target one population: the individual residents of Alaska. Individuals within our state have been paying property taxes and local sales taxes for a very long time. Another population, the cruise ship industry, has been exempt from corporate income taxes since 1998. This exemption exists despite an Alaska Supreme Court ruling that found the imposition of such a tax constitutional.

The time has come for the cruise ships to pay an appropriate share for the services they and their passengers enjoy, services upon which the industry and passengers have become dependent while using Alaskan ports and waters. Cruise representatives argue that such a tax would be illegal; this issue of legality, however, should be determined by the judicial system, not the industry. The State of Alaska does have the legal right and the need to impose such taxes under the Tonnage and Commerce clauses as well as the Maritime Security Transportation Act based on several factors including the cost of services provided and the minimal burden imposed on interstate commerce.

The cruise industry may challenge this tax, but the Alaska Courts should uphold the issue of State's Rights in their inland waters as well as Alaskan's right to require industries that reap the benefits of doing business in Alaska pay their share of the cost of the infrastructure required to sustain their business.

I urge your support and favorable action on this legislation.

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