Alaskans are smoking and drinking less, for health reasons. Marijuana is more complicated

Alaskans are smoking and drinking less, following national health trends, the Department of Revenue’s most recent state “sin” tax data indicates. The decline is gradual but continuous. Marijuana tax data is more complicated. While revenues from marijuana sales are down the decline is linked more to consumers’ shift to less expensive marijuana products, which is yielding less tax income even with steady demand.

Alcohol tax revenues are declining from $19.6 million last year, in Fiscal Year 2025, which ended June 30, to $19.4 million projected for the current fiscal year ending June 30 and $19.1 million in FY 2027, which begins July 1.

The decline in tobacco, particularly cigarettes, is more striking. Cigarette tax revenue has dropped from $16.8 million last year, in FY 2025, to $15.6 million estimated for the current fiscal year, to $14.3 million projected for next year, FY 2027. Like alcohol, this is due to rising concerns for health effects.

“In general, the downward trend for the various ‘sin’ taxes is due to changes in taxpayer behavior either through a decrease in use or a shift to lower taxed alternatives,” said Aimee Bushnell, spokesperson for the Department of Revenue. “For the tobacco taxes, we’re forecasting a continuous decline due to a combination of health trends and a shift to e-cigarettes and nicotine pouches. This mirrors what we have been seeing nationally and in other states,” she said.

“For the alcoholic beverages tax, we’re forecasting a modest decline that stabilizes over the long-term, this is due to health trends causing a decrease in alcohol consumption, especially in younger generations. This mirrors what is happening nationally, in other states. For the marijuana tax, we’re forecasting consumption per person to remain constant, with overall consumption increasing at the same rate as population (0.25 - .50% annually). The downward forecast in tax revenues is due to an apparent market shift to lower-taxed product types. Immature bud/flower and trim are entitled to lower tax rates than mature bud/flower,” Bushnell said.

Most non-resource tax data, such as with the state corporate income tax and state insurance tax, reflects generally stable business activity in Alaska. Natural resource tax income, such as for oil and gas, is watched closely as a barometer of industry activity, but this can also reflect unusual conditions in an industry.

Mining tax income is up, for example, but this reflects mainly the rising gold price rather than more ore being mined. Fisheries business taxes, mainly for nearshore fisheries like salmon, are projected to rise, but that’s more due to a general expectation that the seafood industry will stabilize. But don’t take that to the bank, state revenue economists warn. The situation in fisheries is still volatile.

The state revenue department’s annual Revenue Sources Book, published as a part of the yearly long-term revenue forecast usually issued in December, contains a large amount of information on trends in state income including investment earnings of the Alaska Permanent Fund. It is widely used as a resource for businesses and government agencies.