As the Haines Borough savings dwindle, borough officials are investigating alcohol and tobacco taxes as means of increasing revenues.
At the direction of the assembly, interim borough manager Brad Ryan included in his manager’s budget presentation various tax measures that would increase revenue into borough coffers, including tobacco and alcohol taxes.
A handful of communities across Alaska have instituted what are commonly known as “sin taxes,” excise taxes on products viewed as harmful to society, paid by the retailer or producer. Of the 164 municipalities, 16 towns tax tobacco and 10 report taxing alcohol.
In Southeast, Petersburg, Sitka, Ketchikan and Juneau all have excise taxes on tobacco.
Petersburg taxes $2.02 for each pack of cigarettes and 45 percent of wholesale for other tobacco products. Petersburg coffers earned $248,000 last fiscal year from tobacco tax revenue.
Sitka taxes 90 percent of the wholesale price of all tobacco products, not including cigarettes. It taxes 123 mills per cigarette, a complicated calculation that amounts to around $52,982 in tobacco excise tax revenue in one month.
In fiscal year 2014, the Sitka borough received $489,000 in tobacco tax revenue. For fiscal year 2015, after the borough announced plans to increase the tax, tobacco sellers stockpiled product before the taxes went into effect, said borough senior accountant Larry Fitzsimmons. Sales due to hoarding jacked tobacco tax revenue to $735,000.
With the new rates, Sitka is budgeting $885,000 in anticipated tobacco tax revenue for the next fiscal year.
Ketchikan directs 15 percent of its tobacco tax revenues into cessation programs and the remainder goes to its schools.
According to countyhealthrankings.org, 17 percent of the Haines population smokes compared to 19 percent in Sitka and 18 percent in Ketchikan.
Besides tobacco, Juneau taxes alcohol at 7 percent, which brought around $950,000 into borough coffers.
Haines Brewing Company owners Paul Wheeler and Jeanne Kitayama wrote a letter to the assembly asking them to not implement an alcohol tax.
“A local tax on our product would compound expenses by adding onto the state and federal taxes that we already pay on the beer we sell,” they wrote.
They cited taxfoundation.org statistics showing Alaska has the second highest tax rate in the country on the sale of beer. Alaska charges $1.07 for every gallon of beer sold. The state gives a break to small brewers, like the Haines Brewing Company, that only pays $0.35 per gallon.
Haines Brewing produces around 375 barrels of beer per year and pays $7 per barrel to the federal government. About 31 gallons of beer fill the volume of a beer barrel.
Alaska is fifth highest in the country when it comes to taxing spirits. The state taxes $12.80 per gallon of liquor sold. It offers no tax break to craft distillers. The federal government taxes $13.50 per gallon.
“We pay the same as big import companies,” Port Chikoot Distillery owner Heather Shade said. “There’s no exemptions for locally made products in our state so we bear a disproportionately high burden of excise taxes.”
Assembly member Margaret Friedenauer said she’s in support of exploring sin taxes in the borough, although she doesn’t approve of the regressive nature of the taxes.
“I’m in support in seeing what’s out there,” Friedenauer said. “Tobacco affects the health of a community and so does alcohol, and if we’re spending money on things that support the community we might need to tax things that hurt the community.”
Assembly member Ron Jackson said tobacco and alcohol taxes might get the most community support. He thinks it’s important to talk about where the money would go in the borough.
Assembly member Tom Morphet said he wouldn’t have a problem with seeing alcohol tax revenues go toward the police budget and tobacco tax revenues go to anti-smoking programs or the schools. “There’s a cost with alcohol use that’s direct to the municipality,” Morphet said.