They say it shows the need for better communication between the local legislative bodies.
FAIRBANKS, Alaska - The Fairbanks City Council is fearing a sales exodus after the Fairbanks North Star Borough Assembly voted to increase its tobacco excise tax earlier this month, leading to council calls for better communication between the local legislative bodies.
The borough’s tobacco tax move drew such ire from the panel of Fairbanks elected officials that some questioned whether they could get behind the borough’s 7-year-old project: A long-term development plan for the city’s downtown core. Three months ago, the city was still levying an 8% tobacco excise tax, as was the borough. Those local rates summed 16% total within city limits — because unlike sales use taxes, which are subject to either city rates or borough rates, local excise taxes accumulate.Recently, both the city council and the borough assembly put through legislation raising their tobacco excise tax rates to 20%, also looping in certain vape products.
For now, the borough increase is set to take effect on July 1 to align with the borough’s new fiscal year. At that point, the combined locally levied tobacco excise tax within Fairbanks city limits will amount to 40%. Only time will surface the precise economic impacts of the city and borough measures, but a scenario in which existing businesses flee the city to evade higher rates isn’t as likely for an excise tax as a typical sales tax.
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