In a notable decision that could set a precedent for the travel industry's contribution to climate change mitigation, a federal judge has ruled in favor of Hawaiʻi's right to tax cruise ship passengers. Judge Jill A. Otake of the U.S. District Court for the District of Hawaii struck down a challenge posed by the Cruise Lines International Association, affirming the state's power to levy taxes to combat environmental threats. According to Hawaii Public Radio, the new law, set to go into effect on January 1, 2026, will impose an 11% tax rate on cruise ship passengers' gross fares, prorated for time spent in Hawaiian ports. Gov. Josh Green signed the bill earlier this year, which is estimated to generate close to $100 million annually for the state.
Despite the cruise industry's attempt to quickly halt the enforcement of the tax, arguing that it could damage tourism and violate the Constitution by taxing for the privilege of entering Hawaiʻi ports, Judge Otake denied these motions. She cited the "vital importance" of such taxes to states as per her judgement, obtained by E&E News. The law also allows for counties within the state to collect an additional 3% surcharge, potentially raising the total to 14%. The plaintiffs, including the Cruise Lines International Association, have indicated intentions to appeal the decision.
Opponents of the tax have expressed deep reservations about its impact on the economy of the islands. "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," said Jim McCarthy, a spokesperson for the association, in a statement conveyed by Hawaii Public Radio. Critics fear that the additional tax burden could drive visitors away, negatively affecting an industry that is a significant contributor to the local Hawaiian economy.
State officials, including Attorney General Anne Lopez, support the new law, saying cruise operators should contribute to addressing climate threats. According to Hawaii Public Radio, the judge rejected the U.S. government’s claim that the tax was a “scheme to extort American citizens and businesses.”
