City of Dillingham passes tobacco tax

May 23, 2018

Cigarettes in Dillingham are about to get more expensive. The city expects the new tax to generate $120,000 for the general fund initially. It hopes that over time higher prices will discourage tobacco use.

The cigarette case in Alaska Commercial Co. in Dillingham.
Credit Isabelle Ross/KDLG

The Dillingham City Council passed a tax May 10 on cigarettes and other tobacco products brought into the city.  According to initial projections, it will add around $120,000 to the city’s general fund.

“That tax will help somewhat with the city’s declining revenue streams, such as sales tax and state revenue sharing,” said City Manager Tod Larson.

An excise tax of 100 mills will be placed on each cigarette brought into the city after June 30. This translates into about two dollars a pack. A mill rate is charged based on the price of tobacco products brought into Dillingham. A 45 percent tax will be placed on the wholesale price of other tobacco products brought into the city after July 1.  

In addition to increasing the city’s general fund, Larson said that with the tax, the city aims to discourage tobacco use.

“The primary goal of the excise tax is actually tobacco cessation,” he said. “And there’s a lot of tobacco cessation medical health professionals at the state level, at BBAHC, and they tell us this is one of the best ways to stop people from smoking.”

In past council meetings, community members have voiced concerns about the impact of the tax on low-income consumers. The council hopes to circumvent a disproportionate impact by discouraging tobacco use all together. 

“I think we all hope that this will provide the incentive to quit smoking, and thereby save that group money while improving their health condition overall,” Larson said. 

There are currently 13 retailers licensed to sell tobacco in Dillingham. According to Larson, most retailer questions have been related to paperwork.

Alaska has some of the nation’s highest rates of smoking and tobacco use. According to the Alaska Department of Health, these rates are higher in rural areas.

Contact the author at isabelle@kdlg.org or 907-842-5281.