Proposition 1 was turned down on the October ballot for the city of Unalaska, Alaska. Voter’s had to decide whether to increase the sales tax on marijuana, alcohol, and tobacco by three percent, effectively doubling the tax. There are several other cities in Alaska that had a sales tax increase on alcohol, tobacco, and marijuana on this October’s ballot as well. This type of tax is called a sin tax.

The act only needed a majority vote to pass, but the Unalaska tax increase proposal was not successful as 53% of voters elected against it. The purpose of the increase in these was to offset some of the costs going toward health care, education, and the Department of Public Safety (DPS). This was the main purpose behind the act, which was why the majority of the revenue from the sales tax increase would have gone to funding these areas. The city consistently spends a lot of money regulating alcohol, tobacco, and marijuana. The calls received by DPS often involve one of these three items, alcohol, tobacco, or marijuana, which is why those in favor of it believe it made sense to raise the sales tax on these products.

Those who voted against the sales tax increase explained they chose to do so because they believed increasing the sales tax would encourage users to look to the black market for these items, creating another problem in itself. If users looked to buy these items on the black market verses conventional stores this would take away existing revenue from purchases of these items.

We don’t usually hear much about Alaska as the population is so low compared to many other U.S. states, but people like to indulge there too just like anywhere else. Sin taxes are one of the first types of taxes that states and cities will look to increase when they are having budget issues. The reasoning behind this is that there is usually less push back on increasing taxes on optional items verses necessities.

About the author: Gerald “Jerry” Donnini II is a shareholder of the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Donnini concentrates in the area of state and Federal tax matters, with a heavy emphasis on the tobacco, alcohol, motor fuel and related industries. He also handles a myriad of multi-state state and local tax issues. Mr. Donnini is a co-author for CCH’s Expert Treatise Library: State Sales and Use Tax and writes extensively on multi-state tax issues for SalesTaxSupport.com.  For more information please call us at 888-966-8216.