Cruise industry blames head tax for Alaska cuts

Holland America Line and Princess Cruises plan to cut Alaska sailings in 2010 by 10 percent, saying they blame the state’s head tax and they’re willing to sue to get rid of it.

The redeployments – which will affect Anchorage, Southcentral and the Railbelt more than Southeast – are not unexpected. The Alaska cruise industry has been foretelling gloom for months, and offering deep discounts to encourage now-thrifty travelers. Royal Caribbean cut one ship for 2010 already.

Micky Arison, CEO of Miami- and London-based Carnival Corp. & PLC, told analysts in an earnings call last week, “I would venture to guess that the economic losses, including job losses, in Alaska will be greater than the revenue generated from the taxes imposed.”

Carnival maintains that the head tax is illegal, Arison said.

“If we don’t in the end find a political solution, I assume we will go ahead and litigate the issue, which is a last resort … Other than that, we will have to reduce capacity until we find an equilibrium.”

Voters in 2006 passed a cruise ship ballot initiative that imposed new taxes on the large ships. Each passenger pays a $50 head tax, technically an excise tax.

The initiative imposed on the companies themselves a corporate income tax and a 33 percent tax on gambling income. It also set strict new environmental pollution rules.

Chip Thoma and Joe Geldhof, two Juneau residents who helped pass the initiative, said they thought it was misleading to identify the taxes as the problem. They blame the economy, and say the head taxes are minor in the whole price of an Alaska cruise vacation, including airfare, hotel, gifts and excursions.

“It’s the worst kind of cheesy scapegoating, because nobody really believes it,” Geldhof said.

Geldhof’s evidence: Cruise numbers didn’t go down in the first two years the head tax was levied.

Thoma said the head tax money is supposed to fund dock improvements that large ships need, so it’s counterproductive for them to fight it.

Cruise industry officials in Alaska have said the taxes were just part of the reason for redeployments.

“Certainly, the economy is a factor,” said Bruce Bustamante, Princess spokesman.

Arison said that if yields didn’t bounce back in 2010, deeper cuts could come in 2011.