Sponsor Statement for HB 299

Last session Senate Bill 13 was passed in an effort to reduce the use of cigarettes by minors. Included in the legislation was the little publicized tripling of the wholesale tax on "other tobacco products." While I supported the tax increase on cigarettes, chewing tobacco and snuff I have seen the negative effects of SB 13 on small businesses dealing with cigars and pipe tobacco.

To fix the problem I introduced House Bill 299 to lower the tax rate on cigars and pipe tobacco. Currently the state taxes the wholesale price of cigars and pipe tobacco at 75%. Since the implementation of the tax increase (from 25%) on October 1, 1997 businesses that sell cigars and pipe tobacco have seen a large drop in sales. Consequently, many small businesses are struggling to stay profitable under the new tax structure.

In my district, cigars and pipe tobacco are generally sold in tobacco shops, liquor stores and bars. These establishments are closely monitored by their proprietors or are already off limits to minors. In addition, AS 11.76.100 and AS 11.76.107 prohibit the sale to or possession of tobacco by a person under the age of 19.

The revenues derived from taxes on cigars and pipe tobacco are deposited into the state general fund. The 75% tax rate is an extreme contribution to the general fund by these particular businesses in Alaska.

I urge your support of this legislation.