By: JESSICA LIPSCOMB, New Times
Next time you see a cruise ship at PortMiami, consider this: Because of a loophole in the U.S. tax code, the companies that rake in billions of dollars each year selling cruises to Kid Rock fans and spring breakers pay no corporate income tax.
The Senate’s new tax reform bill originally intended to change that fact. Major cruise lines would have been forced to pay taxes on a portion of their income, putting an extra $70 million in the national coffers each year.
The maneuver was no surprise to the cruise industry, which had artfully deployed lobbyists to haggle with Sullivan, a Republican elected to the Senate in 2014. And Sullivan had good reason to listen: In 2016, the three major cruise lines and their trade group donated a combined $23,500 to keep him in office, making Sullivan the third-highest recipient of cruise industry dollars in the Senate last year.
Sullivan’s spokesman did not respond to an email from New Times asking if the contributions led to his advocacy on the tax issue. In a statement to NBC News, the senator’s office said the cruise tax would have “disproportionately impacted the Alaska economy and its workers.”
“This amendment was important to ensure local businesses and tourism-reliant communities — who rely on the more than one million cruise ship passengers who visit Alaska each year — would not be negatively impacted by this bill,” a spokesman said.
As it stands, cruise lines can easily avoid paying taxes by registering as foreign corporations. Royal Caribbean, which posted a profit of $1.28 billion last year, is headquartered in Miami but incorporated in Liberia. Carnival, a company that pocketed $2.8 billion, has its main office in Doral but is incorporated in Panama. The smaller Norwegian Cruise Line also calls Miami-Dade home while choosing to incorporate in Bermuda.
Critics of the industry, such as Miami attorney Jim Walker, point out the cruise lines pay no federal income tax while still using federal resources, such as the Coast Guard and Customs and Border Protection. Michael Winkleman, a lawyer who frequently battles cruise lines in court, says the industry has become a master class in tax avoidance.
“They have these gigantic get-out-of-jail-free cards, which frees up money for lobbyists to try to help them avoid any U.S. regulations or pay any U.S. taxes,” Winkleman says. “It’s funny because none of their lobbying efforts do the standard passenger any favors. They’re just looking to protect themselves and their bottom line.”
Though the threat of paying more taxes initially caused cruise lines’ stock prices to drop, Sullivan’s assist is already having the opposite effect: As of Monday, shares of Royal Caribbean, Norwegian, and Carnival were once again trending upward.