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Oppose Tobacco Tax Hikes
An Open Letter to the Anchorage Assembly

October 6, 2010

Dear Assembly Member:

     On behalf of the National Taxpayers Union’s 1,100 members who live in Anchorage and throughout Alaska, I urge you to reject a tobacco tax hike whose proponents claim will help to close the city’s budget gap. The Anchorage Assembly should avoid the tired prescription of higher taxes. Instead, the Assembly must recognize that years of increasing spending cannot be maintained, and that targeted budget cuts are necessary to restore the city’s government to its proper, sustainable size.

     Although some see tobacco as an easy target for taxation, the reality is that tobacco tax hikes rarely produce the promised revenue. After the District of Columbia raised its cigarette tax 50 cents last year, the city reported that it collected $15 million less than expected, and $7.6 million less than it collected prior to the tax hike. States that raised their tobacco taxes, including Arkansas, Maryland, Mississippi, New Jersey, and Rhode Island, have also reported shortfalls in revenue collections following the tax hikes.

     Moreover since the poor are more likely to smoke, they disproportionately feel the impact of an increase in the tobacco tax. An Anchorage resident who smokes a pack a day already pays $1,569.92 in taxes per year before the cost of the cigarettes. Tobacco products also account for about a third of sales in convenience stores nationwide according to the National Association of Convenience Stores. A higher tobacco tax would increase the cost of the product, jeopardizing the cash flow of these establishments within Anchorage. Customers may also move away from the city to lower-tax jurisdictions, or even lead to an increase in “bootleg” purchases. Increasing a tax that heavily burdens the poor and threatens to curtail economic activity makes no sense.

     Just as hard-working families in Anchorage have tightened their belts, the Assembly should confront the tough decisions on spending. As Mayor Sullivan has pointed out, the main driver of the budget gap is overgenerous labor contracts between the city and its workforce. Wage increases in excess of the private sector’s should be rescinded. Efforts to find more efficiency and savings in city programs should continue.

     The time has come to stop increasing the tax burden, threatening jobs, and attempting to delay the inevitable necessary reforms to an unsustainable government. Therefore, I urge you to reject a tobacco tax hike as part of the budget.


John Stephenson
State Government Affairs Manager