Here in Alaska, higher tobacco taxes seem to be doing exactly what they are supposed to do: raise revenues and decrease smoking.
This summer, the state reported a 20-percent drop in the rate of adult smokers since 1996. State taxes are now a stiff $2 per pack. In 1996, the state tax on a pack was just 29 cents.
Even though tobacco use is down in Alaska, state tobacco tax revenues have been rising steadily. Thanks to a big $1-a-pack increase phased in beginning in 2005, Alaska collected $72 million last year, a $16 million increase from fiscal year 2005.
Anchorage is using the same approach to promote health and raise money at the same time.
Just before the 2005 state tax increase, Anchorage quadrupled the city tobacco tax to $1.40 per pack. After that big hike, sales of cigarettes in Anchorage dropped by 40 percent. Some cigarette sales undoubtedly shifted to lower-tax jurisdictions, but clearly, some residents are smoking less.
Despite the big drop in Anchorage cigarette sales, city tobacco tax revenues more than tripled, from $5 million to about $16 million per year. Tax collections have stayed at that level the past three years.
Fairbanks isn't so fortunate with its tobacco tax. The Fairbanks Daily News-Miner reported that the Fairbanks city tax revenues from tobacco sales are dropping, and it's a problem. Collections from the city's 8 percent tax have dropped by more than $200,000 since 2004.
It's unfortunate for Fairbanks, but it proves the point that fewer people are smoking.
In recent years, the state has also increased funding for anti-tobacco advertising and beefed up statewide assistance for those who want to quit. So all of the credit for a reduction in the percentage of smoking shouldn't go to the high taxes on cigarettes.
But Anchorage and the state have proved that there's a direct tie: Raise taxes, and people buy fewer cigarettes. And if you raise them enough, you can collect more money even while people are using tobacco less. (Fairbanks, take note.)
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