Tobacco excise tax heads to assembly

Aug 9, 2018

Tobacco users could be a source of additional revenue to the Kenai Peninsula Borough if the assembly approves an ordinance coming up for consideration.

Borough Assembly Member Willy Dunne, of Homer, would like to impose an excise tax on cigarettes and other tobacco products. The measure came before the assembly’s Policies and Procedures Committee on Tuesday. Committee Chair Hal Smalley summarized the proposal.

“Ultimately, it would add 5 cents to the price of each cigarette and 10 percent on the wholesale price of other tobacco products, i.e., chewing tobacco, cigars, etc., those kinds of things, and/or products that deliver or have nicotine in them would be included,” Smalley said. “It’s scheduled to generate new revenues, approximately between $4.5 and $5 million which would go into the general fund.”

In his memo to the assembly, Dunne says his motivation is to compensate for the decline in borough revenue from a loss in state revenue sharing and increases in property and sales tax exemptions, as well as school district funding.  He points out that the state and some municipalities levy excise taxes on tobacco. The Matanuska-Susitna Borough makes about $8 million a year, and Sitka brings in about $830,000.

Dunne notes that voter approval of an excise tax is not required. The measure is scheduled to come up for public comment at the assembly’s Sept. 4 meeting.

The assembly made efficient work of its agenda Tuesday night, gaveling in and out in just over an hour. Items up for consideration were moved to the consent agenda and passed unanimously without debate.

Among them, accepting a little over $10 million from the state of Alaska Department of Education and Early Development for construction of a new, 15,000-square foot, K-12 school to be built in Kachemak Selo. That’s subject to voter approval of just under $5.5 million in bonds for the local match.