A federal judge has upheld the state of Hawaiʻi’s authority to impose a tax on cruise ship passengers, a ruling that could significantly impact the travel industry’s role in climate change mitigation. In a decision announced by Judge Jill A. Otake of the U.S. District Court for the District of Hawaii, a challenge from the Cruise Lines International Association was dismissed, affirming the state’s right to levy taxes aimed at combating environmental threats.
The new law, which will come into effect on January 1, 2026, mandates an 11% tax on cruise ship passengers’ gross fares, adjusted based on the duration of their stay in Hawaiian ports. Signed by Gov. Josh Green earlier this year, the legislation is projected to generate close to $100 million annually for the state.
Despite the cruise industry’s efforts to halt the tax, arguing it could harm tourism and violate constitutional principles, Judge Otake denied these motions. She emphasized the “vital importance” of such taxes for state governments, as reported by E&E News. The law also permits individual counties within Hawaiʻi to impose an additional 3% surcharge, potentially raising the total tax rate to 14%.
While the plaintiffs, including the Cruise Lines International Association, have signaled plans to appeal the ruling, concerns among industry stakeholders persist. Jim McCarthy, a spokesperson for the association, noted the significant economic impact of cruise tourism, stating, “Cruise tourism generates nearly $1 billion in total economic impact for Hawai‘i and supports thousands of local jobs.” He expressed apprehension that the new tax could deter visitors and jeopardize the local economy.
In support of the tax, state officials, including Attorney General Anne Lopez, argue that cruise operators should contribute to the efforts addressing climate change. The judge also dismissed claims from the U.S. government that the tax constituted a “scheme to extort American citizens and businesses.”
As the legal battle unfolds, the implications of this ruling could resonate beyond Hawaiʻi, potentially influencing how other states approach the taxation of tourism in relation to environmental sustainability. The outcome may set a precedent for the travel industry as it grapples with increasing demands for accountability in climate action.