By Abbas Nazil
A federal judge in the United States has ruled that Hawaii can include cruise ship passengers in its new tourist tax, clearing the way for the levy to take effect in 2026.
District Judge, Jill A. Otake, denied a request to stop officials from enforcing the law on cruise ships, allowing the state to proceed with the tax as planned.
Hawaii’s new legislation, signed by Governor Josh Green in May, is the first in the nation to impose a tourist levy specifically to address climate change.
The law increases tax rates on hotel rooms and vacation rentals and introduces an 11 percent tax on the gross fares of cruise ship passengers, prorated according to the number of days vessels spend in Hawaii ports.
Officials estimate that the tax could generate nearly $100 million annually, which will be used to mitigate climate-related issues such as eroding shorelines, wildfires, and other environmental challenges.
The Cruise Lines International Association, together with a Honolulu-based company providing supplies and provisions to cruise and tour businesses on Kauai and the Big Island, filed a lawsuit challenging the tax.
Plaintiffs argue that the law violates the Constitution by imposing a tax for the privilege of entering Hawaii ports and claim that higher cruise costs could negatively impact tourism.
The lawsuit also notes that counties are authorized to collect an additional 3 percent surcharge, which could bring the total levy on prorated fares to 14 percent.
Jim McCarthy, a spokesperson for the cruise association, said cruise tourism generates nearly $1 billion in economic impact for Hawaii and supports thousands of local jobs, stressing the importance of sustaining the industry lawfully.
Hawaii’s Attorney General Anne Lopez affirmed that the state will continue defending the law, emphasizing that cruise operators must pay their share of the transient accommodation tax to help address climate change threats.
The U.S. government intervened in the case, describing the tax as a “scheme to extort American citizens and businesses solely to benefit Hawaii,” claiming it conflicts with federal law.
Plaintiffs and Department of Justice attorneys filed motions to maintain the status quo while the appeal proceeds, but Judge Otake denied these motions, allowing the tax to move forward.
The plaintiffs have indicated their intent to appeal the ruling, ensuring that the legal debate over Hawaii’s climate-focused cruise tax will continue in the courts.
This decision marks a significant step in state-led climate policy and highlights the growing intersection of tourism and environmental funding measures.
