Court upholds borough tobacco tax

Aug. 16, 2006

By Michael Rovito

Frontiersman

The Mat-Su Borough Assembly has the right to levy an excise tax on tobacco products because it possesses broad taxation powers, a Palmer Superior Court judge ruled last week.

The decision ends a debate that started when the borough introduced its tobacco tax in May 2005, with opponents of the tax calling it beyond the scope of the borough's powers.

Tobacco distributors, not consumers, are the ones directly charged by the tax, Borough Attorney Nicholas Spiropoulos said. The tax has been collected during the course of the lawsuit, bringing in $4.6 million to the borough last year.

The two plaintiffs, Wasilla resident Nola J. Bragg and Houston City Council Member Link Fannon, alleged in court documents that the borough had no authority to levy such taxes, and argued that an election should have taken place to let the public determine whether the tax should stand.

In a September article in the Frontiersman, Bragg, who is a smoker, called the tax &#8220just a money grab,” and claimed the borough had passed the ordinance only to raise revenue, which she said made no sense.

&#8220I wouldn't have a problem with it even at the state level if the money would be used for health reasons,” Bragg said, going on to list organizations such as anti-smoking groups and addiction centers that could have received the money.

In her ruling last week, Superior Court Judge Beverly W. Cutler referred to a 1978 case that says municipalities &#8220generally possess broad taxation powers,” according to court documents.

The intent of the tobacco tax is laid out in Mat-Su Borough code as targeting those who acquire tobacco products within the borough, cause tobacco products to be brought into the borough, make, manufacturer or fabricate tobacco products in the borough, or ship or transport tobacco products into the borough.

Tobacco distributors in the Mat-Su Valley reacted Wednesday to the court decision.

Michael Butler, owner of Up N Smoke 2.0 in Wasilla, said even though the damage has been done to his business by the tax, it is still something he wants to see repealed.

&#8220The effect on our business was dramatic,” Butler said, referring to the drop off of customers after the tax was introduced more than a year ago.

According to Butler, after Anchorage passed its tobacco tax, consumers started coming to Wasilla to purchase tobacco products, which made business boom. Now that business has disappeared, and Butler said the borough has purposefully singled out one group of people.

Bragg echoed that notion, asserting that smokers are always the ones to be persecuted.

&#8220As smokers, we've become low-class citizens because we choose to do something that is legal,” she said.

The plaintiff's lawyer in this case, Ken Jacobus, said there is a chance for appeal, depending on what his clients want to do.

&#8220I think there is a good chance of it being overturned,” Jacobus said.

Bragg said that possibility motivates her to continue her fight.

&#8220I think it was an unfair tax,” Bragg said. &#8220The people should have voted on it, not the assembly members.”