Judge to Hawaii: Go Ahead and Tax Those Cruise Ships

A federal judge's ruling has cleared the way for Hawaii to include cruise ship passengers in a new tourist tax to help cope with climate change, a levy set to go into effect at the start of 2026. US District Judge Jill A. Otake denied a request this week that sought to stop officials from enforcing the new law on cruises, reports the AP. In the nation's first such levy to help cope with a warming planet, Hawaii Gov. Josh Green signed legislation in May that raises tax revenue to deal with eroding shorelines, wildfires, and other climate problems. Officials estimate the tax will generate nearly $100 million annually.

The levy increases rates on hotel room and vacation rental stays but also imposes a new 11% tax on the gross fares paid by cruise ship passengers, starting next year, prorated for the number of days the vessels are in Hawaii ports. Cruise Lines International Association challenged the tax in a lawsuit, along with a Honolulu company that provides supplies and provisions to cruise ships and tour businesses out of Kauai and the Big Island. Among their arguments is that the new law violates the Constitution by taxing cruise ships for the privilege of entering Hawaii ports. Plaintiff lawyers also argued that the tax would hurt tourism. The lawsuit notes the law authorizes counties to collect an additional 3% surcharge, bringing the total to 14% of prorated fares.

"Cruise tourism generates nearly $1 billion in total economic impact for Hawai'i and supports thousands of local jobs, and we remain focused on ensuring that success continues on a lawful, sustainable foundation," association spokesperson Jim McCarthy said in a statement. According to court records, plaintiffs asked the judge to grant an injunction pending an appeal and requested a ruling by Saturday afternoon given the law takes effect Jan. 1.

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 said in a statement. The US 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. Department of Justice attorneys are also asking to maintain the status quo for 30 days or until there is an appeals court ruling.