Voters to decide if tobacco taxes rise

Posted: Sunday, September 21, 2003

Tracy Balovich plans to quit smoking this winter, but not because the city may tack on 15 cents to each pack of Marlboro 100 cigarettes that she buys.

Balovich is one of many tobacco users who would pay more under a proposed city ordinance to double the excise tax on cigarettes to 30 cents per pack and double the excise tax on other tobacco products from 6 percent to 12 percent. If passed, it would take effect Jan. 1, 2004.

Balovich recently paid $43 for an 18-pack of nicotine inhalers, but found out her Blue Cross Blue Shield of Alaska coverage at the Alaska State Chamber of Commerce didn't cover the expense. This winter, when it's colder to smoke outside, she hopes to use her state dividend check for a smoking cessation program.

"I think cigarettes are pretty high-priced now," Balovich said after plunking down $5.25 for a pack of Marlboro 100's at Percy's Liquor Store on Thursday. "Health insurance companies don't offer much help for that."

The tax issue started gaining momentum a few days ago because the Oct. 7 vote on the ballot proposition is less than a month away. City and social service officials are pushing hard for the tax increase, but for different reasons. Social service advocates see the tax as a tool to reduce smoking among teenagers and discourage others from starting. City officials want to use the tax to offset part of an anticipated deficit for 2004.

Assembly member Marc Wheeler, chairman of the Human Resources Committee, will lobby to use some of the tax revenue for a social service grant writer, he said. The two groups would begin debate this fall over how much revenue is earmarked for the general revenue fund and social service programs.

In Juneau, 26 percent of youth smoke compared to the national average of 21 percent, said Matt Felix, treasurer of Citizens for Health, a volunteer ad hoc group. Among adults, 28 percent smoke compared to 23.7 percent nationally, Felix said.

Citizens for Health President Ruth Simpson started posting lawn signs Thursday as part of a grassroots campaign in favor of the tax. Simpson, wearing a "Tax Tobacco Not My Home" button against her red blazer, said Friday the tax money could help offset a $177,500 cut to the prevention program fund at the local office of the National Council on Alcoholism and Drug Dependence. The July 1 cut resulted in the loss of two prevention specialists in the middle and high schools.

Felix, also the executive director of the local National Council on Alcoholism and Drug Dependence, said Alaska experienced a drop in teenage smoking when the state raised the tax on a pack of cigarettes by $1 in 1997. The number of teens who started smoking dropped from 32 percent to 26 percent, according to a 1997 Youth Risk Behavior Survey, Felix said.

At that time, the $1 increase made Alaska the most heavily tobacco-taxed state. But now other cash-strapped states have targeted tobacco as a way to increase revenue and reduce deficits.

Other Alaska cities have higher tobacco taxes. Fairbanks collects an 8 percent local excise tax, and Anchorage collects 18 percent for cigarettes and other tobacco products. The state tax on cigarettes is $1 per pack, and the average federal tax is 39 cents. The state tax on other tobacco products is 75 percent of the wholesale price. The federal tax varies.

In Juneau, the proposition would generate about $300,000 in revenue if consumption remains the same, Deputy City Manager Donna Pierce said. When the 5 percent city sales tax is added, the total ranges between $250,000 and $290,000 for fiscal year 2004. That amount would go toward community block grant social service programs.

Then the Assembly would decide how much funding to transfer from the block grant programs to the general fund to offset the deficit, Pierce said. Pierce did not have firm deficit figures, but said it would be at least $2 million for 2004. Part of the deficit is due to the city having to pay $1 million more in retirement funds because of a weak stock market, she said. Community block grant awards total $582,300 for 2004.

Some smokers were skeptical about whether the city's proposal would result in more revenue and fewer smokers. Chrisie Zepp, an accountant with the state, said the added tax would not stop her from smoking, and questioned if it would help reduce smoking among teens.

"The tax has been increasing and increasing," Zepp said while smoking a Kool outside the State Office Building. "Is it dedicated for sure to it? I don't think this is for the kids anymore," she said.

Another smoker said the city may not garner the revenue it expects because more people will stop smoking or buy cigarettes online. A carton of Marlboros cost $15.95 online compared to almost $40 in a store. A pack of cigarettes ranges from about $2.70 to more than $5 a pack in the store, depending on the brand. Other opponents have said the tax could lead to bootlegging.

The tax proposal will appear as Proposition No. 1 on the city ballot and ask residents to vote "yes" or "no" on whether to levy excise taxes on cigarettes and the wholesale price of tobacco products brought into the city after Dec. 31, 2003. The taxes will apply to the entity that first introduces the tobacco products into Juneau, typically the distributor or wholesaler, said city sales tax administrator Joan Roomsburg. The distributor is expected to pass on those costs to the retailer and then the consumer.

Besides cigarettes, tobacco products included under the proposal are cigars; cheroots; stogies; periques; snuff and snuff flour; smoking tobacco, including granulated, plug-cut, crimp-cut, and ready-rubbed; and any form of tobacco suitable for smoking in a pipe or cigarette; chewing tobacco, including cavendish, twist, plug, scrap; or an article or product made of tobacco or a tobacco substitute, but not a substitute prescribed by a licensed physician.

Exemptions include cigarettes or other tobacco products brought into the city by an exchange, commissary or ship's store operated by one of the uniformed services of the United States; and tobacco brought into the city for sale elsewhere.

Any distributor who brings tobacco products into the city for sale elsewhere would be allowed a tax credit per pack of cigarettes or a tax credit based on the wholesale price of the tobacco products.

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