The chairman of the Port of Galveston’s governing board is drafting letters to area political representatives about a provision of the proposed U.S. Senate tax bill that would see cruise companies pay as much as $1 billion more in taxes over 10 years.
“The provision to tax cruise lines that is in the Senate will put in jeopardy the economic benefits that we enjoy in Galveston, and Texas more broadly, from the cruise industry,” Ted O’Rourke, chairman of the Wharves Board of Trustees, said.
“The provision dramatically singles out the cruise industry by removing it from the current treatment of international shipping to levy a direct tax on cruise lines.”
The Senate tax bill includes a proposal to change how cruise lines are taxed by creating a new category of income called cruise gross income and subjecting it to increased taxation.
The provision involves a way to calculate how much time cruise ships spend in territorial waters compared to the total time of the voyage.
The change could cost cruise lines $1 billion in taxes over the next 10 years, O’Rourke said.
“Cruise lines are mobile assets that can be moved from uncompetitive markets,” O’Rourke said. Increased taxes would make U.S. ports less competitive, he said.
Currently, U.S.-based cruise lines operate as foreign corporations to be exempt from paying corporate income tax because of section 883 of the U.S. tax code. Those lines do pay taxes on land-based income, such as in Alaska.
Congressional Republicans earlier this month unveiled their Tax Cuts and Jobs Act, promising tax breaks to middle-class taxpayers.
House Republicans, still searching for their first meaningful legislative victory since President Donald Trump’s inauguration, largely stood behind the plan as it was unveiled, although some said it still needed work.
A version of the bill Thursday passed the U.S. House with a 227-205 vote.
A different version of the bill will now be considered by the Senate sometime after Thanksgiving.
“I respectfully request that as a member of Senate Leadership from the great state of Texas, and as a member of the Senate Finance Committee, that you would work to strike the cruise tax from the bill,” O’Rourke wrote to U.S. Sen. John Cornyn.
The possibility of increased taxes on cruises is particularly major for Galveston as the port depends heavily on revenues from cruise ships.
The budget for the 2017 fiscal year anticipates about 62 percent of the port’s $38.6 million in revenues will be cruise-related.
The Port of Galveston ranks as the fourth-busiest cruise port in the United States and is home to three year-round Carnival Cruise Line ships, one year-round Royal Caribbean ship, one seasonal Royal Caribbean ship and a seasonal Disney Cruise Line ship.
The Port of Galveston is home to two cruise ship terminals on Harborside Drive.