The Trump administration is bolstering the cruise industry’s fight against a passenger tax Hawaii plans to levy to offset the costs of climate change.
In a motion to intervene in the federal court case, the Department of Justice called the state’s “green fee” aimed at cruise ship operators and passengers a “scheme to extort American citizens and businesses.”
The first-in-the-nation fee “flies in the face of federal law twice over” — conflicting with the Tonnage Clause of the U.S. Constitution and the Rivers and Harbors Appropriation Act of 1884, the government said in briefs filed last week with the U.S. District Court for the District of Hawaii.
DOJ’s move comes as the Trump administration has stepped up efforts to battle state initiatives aimed at holding the energy industry financially responsible for the costs of adapting to rising temperatures.
A spokesperson for Hawaii Attorney General Anne Lopez, a Democrat, said the state is “vigorously defending the legality” of the tax law “and will continue to do so.”
Federal intervention in a state tax case is not unprecedented, but it is unusual, said Michael Lurie, a partner at Reed Smith who specializes in state and local taxes. DOJ, he said, “does on occasion weigh in on state tax cases (such as by filing a statement of interest or amicus brief), but this is much more direct.”
He said the federal government appears to be acting to “protect the interest of the public at large against Hawaii using their geographic location and lack of accountability to out of state residents to impose taxes.”
The Cruise Lines International Association filed suit against Hawaii in August, seeking to block the state’s move to place an 11 percent surcharge on the gross fare paid by a cruise ship’s passengers, prorated by the portion of its voyage spent docked in Hawaii ports. The law also authorizes Hawaii counties to collect an additional 3 percent surcharge.
That brings the total tax to 14 percent, “adding up to hundreds of millions of dollars in new fees over the next decade on out-of-state cruise lines and, by extension, their American citizen customers, seeking to visit one of our nation’s most beautiful lands,” DOJ said.
Hawaii’s tax is scheduled to take effect Jan. 1, meaning cruise ships will not be permitted to dock in the state unless they pay the fee, “ultimately funding Hawaii’s ‘green’ climate change initiatives,” the federal government said.
DOJ argues, as the cruise industry association does, that the Constitution’s Tonnage Clause bars states from imposing any “charge for the privilege of entering, trading in, or lying in a port.”
Hawaii’s challengers said the Rivers and Harbors Act bars states from charging “taxes, tolls or any other impositions” on vessels operating in U.S. waters.
“This court must act swiftly to preserve the supremacy of federal law, ending Hawaii’s regime that openly flouts both our nation’s Constitution and federal law for its own political gain,” DOJ said, adding that more states could follow Hawaii’s lead, “creating a balkanization of maritime commerce to disguise state’s individualized environmental regimes.”
Hawaii’s “green fee” was proposed by Gov. Josh Green, a Democrat, and passed the state Legislature in May. It was one of the recommendations made by a climate advisory panel that Green convened after the 2023 Maui wildfires.
The state estimates it will raise about $100 million each year by increasing tourism levies. The law increases the state’s bed tax — the transient accommodations tax — from 10.25 to 11 percent.
Hawaii has moved to dismiss the cruise industry lawsuit, arguing the federal Tax Injunction Act “prohibits a federal district court, in most circumstances, from issuing an injunction enjoining the collection of state taxes.”
But Lurie, the Reed Smith attorney, suggested DOJ’s move to intervene makes it more likely the federal court will find it has jurisdiction under the Tax Injunction Act.
The Supreme Court, he said, has recognized an exception applies “when the United States is a party to the case.” Some lower courts, he said, have suggested that if the U.S. is a party to the case, federal courts have jurisdiction
“Now that the U.S. government has asked to be involved, I think there’s a very high chance the court will grant the motion to intervene,” he said.
Hawaii has also argued the cruise association and companies that joined the lawsuit lack standing to bring the case because they have not proven an injury.
Even if the court finds it has jurisdiction, Hawaii said, the lawsuit should be dismissed because the tax does not violate the Tonnage Clause, and the Rivers and Harbors Act does not provide for individuals or organizations to bring lawsuits.
The state said the Tonnage Clause does not apply because Hawaii’s tax is not a charge “for the privilege of entering, trading in, or lying in a port,” but is instead a tax on short-term accommodations.
