DearAssembly Member:
On behalf of the National TaxpayersUnion’s 1,100 members who live in Anchorage and throughout Alaska, I urge youto reject a tobacco tax hike whose proponents claim will help to close thecity’s budget gap. The Anchorage Assembly should avoid the tiredprescription of higher taxes. Instead, the Assembly must recognize that yearsof increasing spending cannot be maintained, and that targeted budget cuts arenecessary to restore the city’s government to its proper, sustainable size.
Althoughsome see tobacco as an easy target for taxation, the reality is that tobaccotax hikes rarely produce the promised revenue. After the District of Columbiaraised its cigarette tax 50 cents last year, the city reported that itcollected $15 million less than expected, and $7.6 million less than itcollected 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 revenuecollections following the tax hikes.
Moreoversince the poor are more likely to smoke, they disproportionately feel theimpact of an increase in the tobacco tax. An Anchorage resident who smokes apack a day already pays $1,569.92 in taxes per year before the cost of thecigarettes. Tobacco products also account for about a third of sales inconvenience stores nationwide according to the National Association ofConvenience Stores. A higher tobacco tax would increase the cost of theproduct, jeopardizing the cash flow of these establishments within Anchorage.Customers may also move away from the city to lower-tax jurisdictions, or evenlead to an increase in “bootleg” purchases. Increasing a tax that heavilyburdens the poor and threatens to curtail economic activity makes no sense.
Just as hard-working families in Anchorage havetightened their belts, the Assembly should confront the tough decisions onspending. As Mayor Sullivan has pointed out, the main driver of the budget gapis overgenerous labor contracts between the city and its workforce. Wageincreases in excess of the private sector’s should be rescinded. Efforts tofind 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 toan unsustainable government. Therefore, I urge you to reject a tobacco tax hikeas part of the budget.
Sincerely,
JohnStephenson
StateGovernment Affairs Manager