Tax facing another hurdle

Proposed legislation puts borough tobacco levy in jeopardy

February 24, 2006

DARRELL L. BREESE\Frontiersman reporter

JUNEAU - The tobacco tax approved by the Mat-Su Borough Assembly has faced many challenges since it was passed in May. Residents attempted to repeal the tax via an initiative, which voters rejected. Currently, a pair of residents is challenging the validity of the tax in Superior Court.

The most recent challenge to the tax is coming from Juneau, where Rep. Jim Elkins, R-Ketchikan, has introduced a bill that would repeal the borough's tax and limit all future tobacco taxing ability to the state.

Elkins' bill has officials with the Mat-Su Borough concerned, as it threatens to eliminate an estimated $4 million in revenue from borough coffers.

&#8220We can't afford to take this lightly,” assembly member Bill Allen said. &#8220This is a revenue source, and if it were eliminated, it would have serious consequences on the current budget process.”

According to Jim Van Horn, a spokesman for Elkins, the bill was introduced at the request of a constituent and in response to the recent increase of communities enacting taxes on tobacco products.

&#8220The main reason for the bill is to prevent local governments from taking away the state's ability to tax tobacco,” Van Horn said. &#8220There is a growing trend among communities to tax tobacco to fill the general fund, while the state tax on tobacco is going to fund education and health-related programs.

&#8220I requested the legislation promoting an excise tax moratorium on municipal taxation of tobacco, because we feel that the local governments are usurping the state of Alaska's authority to tax and regulate these products,” Mike Elerding, president of Northern Sales of Alaska, a tobacco wholesaler.

&#8220The state has the right and responsibility to tax tobacco,” Elerding continued. &#8220As local governments implement new excise taxes on tobacco, it is going to create a confusing and complicated array of regulation that will impede the state's ability to regulate and control the distribution of these products. There would be a mish-mash of little feudal states doing their own thing.”

Elerding said Alaska is just one of eight states that allow local governments to tax tobacco. The others are Alabama, Illinois, Missouri, New York, Ohio, Tennessee and Virginia.

The Mat-Su Borough, Anchorage, Fairbanks, Juneau and the North Star Borough currently have tobacco taxes in place. Sitka recently approved a tobacco tax as well, which went into effect on Jan. 1.

Elkins' bill eliminates the ability of cities or municipalities to implement an excise tax on tobacco that was not in effect before July 1, 2005, thus repealing the Mat-Su Borough's tax and the one approved by Sitka. It would not affect the tax in Anchorage, Fairbanks or Juneau.

Contact Darrell L. Breese at 352-2267 or darrell.breese@

frontiersman.com.