Legislature(2003 - 2004)

2004-03-18 House Journal

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2004-03-18                     House Journal                      Page 2995
HB 538                                                                                            
HOUSE BILL NO. 538 by the House Rules Committee by request of                                       
the Governor, entitled:                                                                             
     "An Act relating to taxes on cigarettes and tobacco products;                                  
     relating to tax stamps on cigarettes; relating to forfeiture of                                
     cigarettes and of property used in the manufacture, transportation,                            
     or sale of unstamped cigarettes; relating to licenses and licensees                            
     under the Cigarette Tax Act; and providing for an effective date."                             
was read the first time and referred to the House Special Committee on                              
Ways & Means and the Labor & Commerce and Finance Committees.                                       
The following fiscal note(s) apply:                                                                 
1.  Fiscal, Dept. of Public Safety                                                                  
2.  Fiscal, Dept. of Revenue                                                                        
The Governor's transmittal letter dated March 16, 2004, follows:                                    

2004-03-18                     House Journal                      Page 2996
"Dear Speaker Kott:                                                                                 
Under the authority of article III, section 18 of the Alaska                                        
Constitution, I am transmitting a bill that would increase the cigarette                            
excise tax from five cents per cigarette to ten cents per cigarette.  The                           
tax on "other tobacco products" such as smokeless tobacco would be                                  
increased from 75 percent to 100 percent of the wholesale cost.                                     
This bill provides the multiple benefits of saving Alaskan lives,                                   
reducing health related expenditures, and raising state revenue.                                    
Increasing the price of tobacco is one of the most effective ways of                                
reducing tobacco use, especially among youths. It is well substantiated                             
that as the price of cigarette increases, rates of smoking decline.  As                             
youths are especially sensitive to such price increases, we can expect                              
the proposed $1.00 per pack cigarette tax increase will add to the 50                               
percent drop in youths smoking rates we have seen in Alaska since                                   
1995.  A further drop in youths smoking rates of just 15 percent from                               
current levels would translate into 1,800 lives saved from premature                                
death due to tobacco addiction among Alaska high school students                                    
alive today.                                                                                        
Among current adult smokers, 3,500 will quit smoking because of the                                 
tax, and of those, 800 will be saved from a smoking-caused death.                                   
Smoking among expectant mothers would also be reduced                                               
significantly, resulting in 850 babies being spared from exposure to                                
maternal smoking while in utero during the next five years.  The                                    
impact of tobacco taxes on health is not unprecedented in Alaska.                                   
Within a year of the implementation of the $1.00 per pack cigarette tax                             
in October 1997, the number of cigarettes consumed in Alaska had                                    
dropped by 15 percent, and sales have not rebounded since then.                                     
Alaska Natives should particularly see the benefits from reduced                                    
smoking.  While smoking rates are declining within the U.S. general                                 
population, the rate of smoking is unchanged among Alaska Native                                    
adults and, at 44 percent, is almost double that of non-Natives.                                    
Currently, 44 percent of Alaska Native high school students smoke,                                  
almost four times the rate among non-Native students.  One-third of                                 
Alaska Native high school boys use smokeless tobacco, as do one-                                    
sixth of their female counterparts.  Use of smokeless tobacco among                                 
Alaska Native girls is nine times higher than the national rate.  Lung                              

2004-03-18                     House Journal                      Page 2997
cancer, the leading cause of cancer deaths, is increasing at an alarming                            
rate among Alaska Natives of both sexes.  Cardiovascular disease,                                   
including heart disease and stroke, is also linked with tobacco use, and                            
kills approximately 120 Alaska Natives each year.                                                   
In addition to the devastating health impacts, smoking is a fiscal                                  
disaster for Alaska.  The state receives nearly $47 million in cigarette                            
and other tobacco product tax revenues, but this amount doesn't even                                
begin to cover the economic and social costs associated with smoking-                               
related illnesses.  The Centers for Disease Control and Prevention                                  
(CDCP) estimates that in 1998 the cost for direct medical expenses                                  
attributed to smoking-related disease and death in Alaska was nearly                                
$133 million.  In addition, CDCP estimates Alaska's total cost of lost                              
productivity due to early tobacco-related deaths in 2001 was $137                                   
Alaska can expect to see fiscal savings relatively soon following                                   
implementation of this proposed tax.  Within five years, the health                                 
care savings from fewer smoking affected pregnancies and births will                                
amount to $1.6 million, according to the Campaign for Tobacco-Free                                  
Kids.  This group estimates that the savings in the state from fewer                                
smoking-related heart attacks and strokes will be $1.8 million, and the                             
long-term health care savings from adult and youth smoking declines                                 
will be $146.3 million.                                                                             
While saving in medical and lost-productivity expenditures, the                                     
proposed tax would also generate an estimated $35.5 million in new                                  
tax revenues for the state annually.  In addition, an estimated $350,000                            
in new revenues will be generated for those municipalities in the state                             
that levy a sales tax on the retail price of cigarettes.                                            
With cigarette taxes at $2.00 a pack, there will be incentive for tax                               
evasion and smuggling.  The new tobacco tax stamp, as passed into                                   
law last year, will help address this issue by serving to identify illegal                          
cigarettes.  To further advance this enforcement effort, my proposed                                
bill allows the Department of Public Safety to seize and dispose of                                 
equipment, vehicles, money, and other assets used in cigarette                                      
smuggling and tax evasion activities.  These types of seizures will                                 
make cigarette smuggling and tax evasion less attractive and protect                                
state revenues.                                                                                     

2004-03-18                     House Journal                      Page 2998
Given the health impact, cost savings, and revenue to be generated                                  
from the proposed tobacco tax, I urge your support for this legislation.                            
                                Sincerely yours,                                                    
                                Frank H. Murkowski