The maritime industry has filed a lawsuit against the state of Hawaii, seeking to block the enforcement of a new climate-related tax that applies to hotels, short-term rentals, and for the first time, vessel passengers. The lawsuit, led by a major industry association, argues the tax is unconstitutional and will harm both the industry and Hawaii’s tourism-dependent economy. Hawaii’s government passed the law to raise funds for climate-related issues such as beach erosion and wildfires.
Key Provisions of the Green Fee
The new law, passed in May, is a 0.75% hike that raises Hawaii’s existing transient accommodations tax from 10.25% to 11%. For the first time, this tax is applied to vessel passengers, who will be charged an 11% fee on their gross fares, prorated based on the days a vessel is in port. Additionally, counties can add a 3% surcharge, potentially bringing the total fee to 14%. The state estimates the tax will generate $100 million annually for climate change-related projects.
Legal and Economic Arguments of the Lawsuit
The lawsuit makes several claims:
- Constitutional Violations: It argues the tax violates the U.S. Constitution’s tonnage clause and the federal Rivers and Harbors Appropriation Act of 1884. These laws limit the fees states can impose on vessels using navigable waters, requiring such fees to be for services directly provided to them. The lawsuit contends that Hawaii is using the money for its general treasury and “green projects,” not for services to the vessels themselves. This is similar to a 2016 lawsuit the association filed against Alaska.
- Unfair Treatment: The lawsuit alleges the tax is unfair because passengers do not receive the same exemptions as hotel and rental guests. This, the plaintiffs argue, makes the law disproportionate and discriminatory against a specific sector of the tourism industry.
- Freedom of Speech: A provision requiring vessel lines to post notices onboard about the tax and include similar information in advertisements for Hawaii-bound voyages is challenged as a violation of freedom of speech.
- Economic Impact: The lawsuit claims the tax will significantly raise costs for families, potentially causing tourists to choose other destinations. This would harm not only the industry but also local Hawaiian businesses that rely on vessel passengers, who contributed over $600 million to Hawaii’s economy in 2023.
The lawsuit filed by the maritime industry against Hawaii’s Green Fee law highlights a growing tension between environmental initiatives and the tourism industry.
While Hawaii aims to fund critical climate adaptation efforts, the maritime industry argues the tax is an unconstitutional and unfair burden that could deter visitors and harm the state’s economy. The outcome of the scheduled hearing on October 31 will be crucial, as a ruling could either uphold the state’s innovative funding model or set a legal precedent that limits similar taxes in other coastal states.
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Source: Marine Insight
