Tobacco and marijuana taxes will take effect Jan. 1, 2018 after the assembly voted to approve the excise taxes Tuesday.
The assembly voted 4-2 to charge a $2 per pack excise tax on cigarettes and 45 percent of the wholesale price of other tobacco products.
The assembly pushed the tax to a fourth public hearing after retailer Mike Ward objected to the tax last month. Ward attended Tuesday’s meeting and said a $2 excise tax will mean a $3 increase to the consumer.
“Retailers operate on gross profit percentage,” Ward said. “Your cost goes up, your price goes up. The cost goes up $2 my price goes up more than $2 depending on what the commodity is.”
Ward said the volume of cigarettes he’s sold over the years has decreased and that the tax was a “band aid of a budgetary fix.”
The borough should look at taxing purchases online instead, Ward said.
He added the tax was an unfair burden on a small percentage of the population and a person who smokes a pack a day will pay an extra $90 a month.
Assembly member Ron Jackson supported the tax and said he thought it would decrease smoking in youth.
According to a 2012 study cited on the Center for Disease Control’s website, a 10 percent increase in the cost of tobacco decreases smoking by 3 to 5 percent and that “youth and young adults are two to three times more likely to respond to increases in price than adults.”
Assembly member Stephanie Scott said federal and state governments have already increased regulations to inhibit smoking.
“In my opinion we have reached a pinnacle of regulation that’s going to change people’s behavior,” Scott said.
Assembly members Tom Morphet and Sean Maidy both said the tax will help decrease the borough’s budget deficit.
Borough staff proposed the tax during last spring’s budget hearings as a way to increase revenues to reduce the borough’s $413,000 deficit.
Borough staff estimated tobacco tax revenues could range from $60,000 to $180,000 based off per capita rates from Petersburg and Sitka.
Scott and assembly member Tresham Gregg voted against the tax.
Mayor Hill broke a 3-3 tie to approve an excise tax on marijuana.
The excise tax of $5 per ounce will be levied against cultivators.
Erika Merklin is waiting for state approval to start her commercial marijuana cultivation business. She spoke out against the tax.
“I think you need to let these businesses shake out a little bit. Once they’re established, see how much money we’re actually making after we pay our bills and then I think you should revisit this after we’re operational,” Merklin said.
Merklin also questioned why marijuana excise tax revenues were planned to go into the general fund and not the police department.
“Part of the application process for this type of business is to have security and that security needs to be linked with a police station and for police to respond. I don’t know where we stand right now with police.”
Currently, police are only supposed to respond to emergencies outside the townsite.
Morphet and Maidy both thought an additional marijuana tax should be placed at the retail level. Morphet also opposed the excise tax because he wanted to implement an alcohol tax at a future date, which according to state law would have to be paired with another tax at a similar rate. He wants to pair a marijuana tax with alcohol. Morphet, Maidy and Scott voted against the tax.
Hill broke the tie by voting in favor of the marijuana excise tax.
Petersburg, Sitka, Ketchikan and Juneau are among Southeast communities that have tobacco excise taxes.
Ketchikan directs 85 percent of its tobacco tax revenues into its schools.