A federal appeals court has temporarily blocked a new Hawaiian law that would have imposed a significant tax on cruise ship passengers to fund climate change initiatives. The ruling, issued on New Year's Eve, puts the first-of-its-kind levy on hold while legal challenges proceed.
The tax, which was scheduled to take effect at the start of 2026, faced a lawsuit from the cruise industry arguing that it violates the U.S. Constitution. The state had projected the measure would generate nearly $100 million annually to combat environmental damage.
Key Takeaways
- A federal appeals court granted an injunction, pausing Hawaii's climate tax on cruise ship passengers.
- The law, Act 96, would have imposed an 11% tax on prorated cruise fares, with counties able to add a 3% surcharge.
- The tax was designed to raise approximately $100 million per year for climate-related issues like shoreline erosion and wildfire prevention.
- The Cruise Lines International Association challenged the law, arguing it unconstitutionally taxes vessels for entering Hawaiian ports.
A Last-Minute Injunction
Just before the new year, two judges from the 9th U.S. Circuit Court of Appeals granted a request for an injunction, halting the enforcement of Hawaii's climate tax specifically on cruise lines. This decision came after a lower court, led by U.S. District Judge Jill A. Otake, had initially upheld the law.
The legal challenge was brought forward by the Cruise Lines International Association (CLIA), a major trade group representing the cruise industry. The U.S. government also intervened in the case, appealing the initial ruling alongside the CLIA. The injunction means the state cannot collect the tax from cruise operators while the full appeal is considered by the court.
Details of the Proposed Tax
Signed into law by Governor Josh Green in May, the legislation was a landmark effort to make the tourism industry contribute directly to mitigating its environmental impact. It was widely seen as the first levy of its kind in the United States designed to cope with a warming planet.
The law would have imposed an 11% tax on the gross fares paid by a cruise ship passenger. This amount would be prorated based on the number of days the vessel spent in Hawaiian ports. Additionally, the law authorized counties to collect an extra 3% surcharge, potentially bringing the total tax to 14% of the prorated fare.
While the legislation also included increased rates for hotel rooms and vacation rentals, the lawsuit filed by CLIA focused exclusively on the provisions targeting cruise ships. The association argued that the measure would unfairly burden their industry and make cruises to Hawaii more expensive for travelers.
The Core of the Legal Dispute
The central argument in the lawsuit is that the tax violates the U.S. Constitution. CLIA contends that the levy effectively functions as a charge for entering Hawaii's ports, which they argue is unconstitutional. Their legal filings claim that such a tax oversteps state authority.
A Precedent-Setting Climate Initiative
Hawaii's Act 96 was designed to create a dedicated revenue stream to address urgent environmental problems facing the islands. State officials have pointed to issues like severe coastal erosion, the increasing risk of wildfires, and other climate-related challenges as justification for the tax. The nearly $100 million in expected annual revenue was earmarked for projects to protect Hawaii's natural resources.
State officials have defended the law's legality. Following the court's injunction, a spokesperson for the Hawaii attorney general's office expressed confidence in their position.
"We remain confident that Act 96 is lawful and will be vindicated when the appeal is heard on the merits," said Toni Schwartz, spokesperson for the Hawaii attorney general’s office.
Schwartz confirmed that the order temporarily halts the enforcement of the law on cruise ships but does not affect other parts of the legislation. The future of the tax now rests on the outcome of the full appeal process in the 9th Circuit.
What This Means for Travelers and the Industry
For now, cruise passengers planning trips to Hawaii will not see the new tax added to their fares. The injunction provides temporary relief for cruise lines, which had opposed the measure since its inception due to concerns about increased operational costs and reduced demand.
The case is being watched closely by other tourism-dependent states and nations grappling with the effects of climate change. If Hawaii's law is eventually upheld, it could create a model for other destinations looking to fund environmental programs by taxing visitors.
However, if the courts ultimately side with the cruise industry, it could limit the ability of states to impose similar taxes on maritime commerce. The final outcome will have significant implications for both the travel industry and government efforts to fund climate resilience.
