Tuesday, April 14, 2009

Alaska Realizing Consequences of Higher Taxes

Alaska relies heavily on its tourism industry for revenue. A major part of that industry is cruises. In an effort to make the cruise lines "pay their fair share", the state passed a referendum in 2006 which increased taxes on the cruise lines for every passenger they brought to Alaska.

Shockingly, those cruise lines are now reducing the amount of business they do in Alaska.
In February, Royal Caribbean International announced that in 2010 it would redeploy the Serenade of the Seas, one of its three ships operating in Alaskan waters. The cruise line cited the high cost of doing business in the Frontier State.

The following month, Carnival Corp. followed suit, significantly reducing the 2010 capacity of the Alaska market’s two biggest players, Holland America and Princess.

Those moves were the culmination of almost constant industry protests since the Cruise Ship Initiative was enacted.

Binkley said the loss of Royal Caribbean’s Serenade of the Seas would mean 42,000 fewer visitors to Alaska in 2010, which translates to an estimated loss of $55 million in tourist revenue.

"I’ve been concerned for some time as I’ve seen the cruise traffic level off for the last three years," he said. "We’ve lost market share."


Charles D said...

Since the cruise lines kept coming through 2006, 2007 and 2008 and are only reducing their business now due to the economic downturn, I wouldn't say that Alaska is "realizing the consequences of higher taxes", they are realizing the consequences of the deep recession brought on by deregulation. The fact that it leveled off over the last 3 years may have been due to other factors - market saturation, competition, etc. Of course they would rather blame the state for their problems.

The same thing is happening all over the nation with sales taxes, usage fees, and property taxes. As a result, states and localities are having to reduce services and layoff workers which only makes the situation worse.

Cameron said...

That would be true if the cruise lines were no longer using those ships at all - which is not the case. They are still using them, just in other parts of the world. The reason is because it's more expensive to sail them in Alaska than it is in those other parts of the world. One big reason why it's more expensive is because of the increased tax.

Cause - tax, Effect - Lost business

Charles D said...

It looks like they may be sending them to Cuba according to the news reports.

Also, do remember that if there were no taxes there would be no government services or infrastructure. That's not exactly attractive to tourists either.

Cameron said...

And by raising taxes on business, business chose to leave, resulting in fewer revenues for government services or infrastructure.