News from Patrick Flynn

A burning issue

Among the many agenda items at the next Assembly meeting, including the first of three public hearings on the administration’s 2011 budget plan, is a proposed increase in Anchorage’s tobacco taxes.  If you’ll pardon the pun, all the heat and light focused on the upcoming election has diverted attention away from this idea but I’ve actually spent some time cogitating on the matter.

From a public policy perspective there are two primary considerations related to raising tobacco taxes:

  • Because tobacco taxes fall under the tax cap increased revenue from that commodity can offset, or at least mitigate increases to, property taxes.
  • Increased prices reduce consumption and therefore improve public health.

Regular readers are aware of the many discussions I’ve had about diversifying Anchorage’s tax base, so from that perspective increased tobacco taxes are somewhat attractive.  The proposal before us, however, estimates raising between $5.2 and $6.2 million, which doesn’t provide much in the way of diversification.  If we were having a broader discussion of restructuring revenues (and no, the administration’s fee & fine increase legislation doesn’t rise to that level, either) then I’d be favorably inclined to include tobacco taxes as part of the equation.  As a standalone, however, I’m not sure it’s a good option.

Editor’s note: just to be clear, I don’t smoke and I don’t like smoking.  I was thrilled when smoking was banned from public places and cringe when I visit cities where that’s not the case.  Adults have the right to smoke if they want, just as they have many other rights, but I don’t like to be around when they exercise that right.

More generally, if memory serves Alaska’s tobacco tax increases began in earnest in 1997 when state legislation increased the per-pack tax on cigarettes to around $1.  I recall the issue pretty well, in part because the campaign I worked on the preceding year produced radio ads chastising the incumbent for voting in favor of increasing another tax that hurt local small businesses but against increased tobacco taxes.  Since then both state and local tobacco taxes have increased further, while a national legal settlement with tobacco companies also brought in new revenue.  A portion of that revenue has been employed in smoking cessation campaigns and smoking rates have declined over the years.

Given the steep increases in the cost of cigarettes and other tobacco products, in addition to the health benefits, there’s a clear economic incentive for quitting smoking.  And there are plenty of resources available to help smokers quit, which begs the question of why people still smoke?  Various studies provide varying opinions and it’s my feeling that most remaining smokers want to quit, and have tried to quit, but just can’t shake the habit.  Further, it appears that demographic tends toward the lower end of the income spectrum, which raises concerns that added tobacco taxes result in a regressive burden without achieving a commensurate increase in public health.

And no issue would be complete without an astroturfing campaign.  Both sides of this discussion have web sites where sympathizers can fill out a quick form and – voila! – Assembly members receive a well-written “personal” message from the sender; except for being identical, or nearly so, to all the other e-mails.  (Readers may rest assured I provide an equally personal response!)

In sum, I’m not entirely sure how I’ll proceed on this one.  Obviously I have concerns, but no proposal is perfect.



This contribution was made on Saturday, 23. October 2010 at 16:07 and was published under the category Fiscal matters. You can follow comments on this entry through the RSS-Feed.

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  1. Excuse me! The original tobacco tax was initiated by your mother locally in the late 80’s and early 90s. The state got on board later. Yes, please support the increase in tobacco tax, not because it provides much revenue, but because it deters a bad health habit. But I suggest greater diversity in the revenue stream. First, place a charter change on the ballot to recind the 60% requirement for sales taxes. Then initiate a 3% to 4% general sales tax excluding food and medication. Property taxes would be significantly reduced and our million visitors a year would help pay the bills.

    Comment: hf – 24. October 2010 @ 2:02 pm

  2. Mr. Flynn,

    Thank you for the responce to my email. However, I must respond to the above comment.

    hf- First, how about if we try to find a solution to the revenue question in play.

    The tax on smokers will not solve the problem. Nor will taxing a habit solve the health concerns that MAY occur in a smokers life.

    If my memory serves me, Alaska was awarded around $25,000,000. from the tobacco companies, that went into the general fund and I don’t believe that money saved us from the revenue peoblem we faced at that time or now.

    Maybe it’s time to look at how our spending has perhaps gotten out of control.

    Maybe, just maybe, the answer to the problem lies in the waste we can not seem to control.

    Now, regarding your 3% sales tax to take advantage of our million tourists a year. Lets suppose we collect say $3,000,000. per year from those tourists.
    Lets see, oh we’re still short. How about 6% so we get $6,000,000. Still not enough. Lets go for a 9% sales tax. Now we’re beginning to talk some real money, but………the rest of us live here so now we are stuck with paying the sales tax year around. Thats a solution. Increase the cost of living by 9% a year.

    Lets get to the source of the problem before we start increasing the burden on the citizens of Alaska.

    Just a thought!

    Comment: GWM – 31. October 2010 @ 5:54 pm

  3. Hi Mr Flynn,

    I agree with the GWM the we should try to find a solution to the problem besides raising taxes. Adding a sales tax will increase the cost of living for all residents, but our wages are not going to increase and this could cause a hardship for a lot of individuals.

    Additionally, increasing the tobacco tax could actually cause reduced revenue from these taxes in the long run. I say this because more people will quit smoking due to the increase in price. This may thrill a lot of people but the money that is saved on health care for smokers may not make up for this lost revenue. Everyone looks down on people who smoke, but if people didn’t use tobacco products, where would this money come from? Using tobacco products has caused health problems for some individuals, but so has the sun. Let’s be real.

    Comment: KAA – 02. November 2010 @ 4:00 pm

  4. I hate tobacco products and I have never used them, but I do not think local government (or any other government) should wring money out of people who have this ailement to meet general government obligations.

    You see the people who are addicted to tobacco; many drive crummy cars and live in poorer parts of town. They are vulnerable to abuse, and sickness and criticism, yet the product they use is not illegal and they have a right to spend their money any way they want to spend it. Raising the cost of using tobacco simply encourages a black market for tobacco, or travel to other localities to buy these products where the tax is lower.

    Social engineering through tax policy is a slippery slope and it is time to get off that bandwagon.

    Comment: Donn Liston – 08. November 2010 @ 3:15 pm

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