City of Dillingham considers tobacco tax

Jun 20, 2017

The City of Dillingham is considering a tobacco tax that could add a quarter million dollars to the general fund.

Credit KDLG

The City of Dillingham is considering putting a tobacco tax in place to help raise revenue and perhaps deter some young smokers. One proposal suggests the tax could raise about a quarter million dollars a year, but the details have yet to be finalized. KDLG’s Allison Mollenkamp has more.

The Finance and Budget Committee continued their work on the tobacco tax proposal at their meeting last week. City Finance Director Navin Bissram presented the idea of a mill tax.

“If we were to go with a mill rate, my understanding is we could just apply a mill rate against all purchases that were made as opposed to having a tax per pack of cigarettes.”

A mill rate would be charged based on the price of tobacco products brought into Dillingham. The Council is also still considering a per-pack tax. This proposal would replicate the tax system put in place in Bethel in 2013. Dillingham Mayor Alice Ruby says this could generate significant revenue.

“You know our best estimate is if we duplicated what Bethel is doing, then potentially, we could generate you know, like $20,000 a month or so in revenue, but again it would depend on the level of tax that was established.”

That 20 thousand number is based on estimates provided to the council by the Bristol Bay Area Health Corporation. Those calculations assumed a two dollar per pack tax on cigarettes and a 75% tax on other tobacco products. Bethel currently has a 45% tax on other tobacco products. If those estimates prove accurate the tax could generate two-hundred and forty thousand dollars in revenue for the general fund. That would add to the city’s current 12.2 million dollar budget for 2018. Mayor Alice Ruby says the revenue isn’t the only benefit.

“Two benefits. One is it generate revenue for the community, and the other is it ends up, hopefully, serving as a deterrent, you know, for smoking, especially for young people, because it just prices them, hopefully, so that they’re at least a little bit out of range for young people to, to start smoking.”

Rhonda Jenkins is the Grocery Manager for the Alaska Commercial store in Dillingham. She agrees higher prices could deter young people with lower wages, but thinks a tax wouldn’t have a noticeable effect on overall tobacco sales.

“People who choose to smoke, it’s definitely a luxury, but I don’t think it’s, I really don’t foresee it becoming like an issue as far as affecting us with the actual sale of tobacco.”

Alaska Commercial is one of 6 retailers with a license to sell tobacco in Dillingham. The Council hopes to get input from retailers and citizens before a vote on the tax in August. If the tax passes it would go into effect in October.

Contact the author at allison@kdlg.org or (907) 842-5281.