Ballot Proposal for Retail Sales Tax on Alcohol within the Municipality of Anchorage AO No

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1 Ballot Proposal for Retail Sales Tax on Alcohol within the Municipality of Anchorage AO No Anchorage Chamber of Commerce January 28, 2019

2 English Economist As a teacher and builder of the School of Economics at the University of Cambridge, he trained and influenced many Cambridge economists who went on to take chairs of economics around the world.

3 Pigouvian Tax A Pigouvian tax is a tax on any market activity that generates negative externalities (costs not included in the market price). The tax is intended to correct an undesirable or inefficient market outcome, and does so by being set equal to the social cost of the negative externalities. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. Source: Wikipedia

4 What is considered an externality? ATTRIBUTABLE TO ALCOHOL AND ALCOHOL MISUSE* Productivity losses = $775.1 million Vehicle Traffic Collisions = $594 million Criminal Justice and Protective Services = $270 million Health Care = $182 million Public Assistance and Social Services = $15 million Underage Drinking = $349.6 million Number of Deaths = 730 in AK Anchorage is 42.5% ( ) TOTAL = $1,840,000,000 *All numbers are for SOA unless otherwise specified Sources: The Economic Costs of Alcohol Abuse in Alaska, McDowell Group, 2016 and Consumption and Consequence, Alaska Substance Abuse Epidemiology Workgroup, 2018 and the Alaska Indicator-Based Information System

5 What is the structure of this proposal? Requires an amendment to the Anchorage Charter 5% flat rate Includes all retail businesses that sell alcohol Voter approval authorizes Assembly action April 2, 2019 public vote in the MOA election (Vote By Mail ballots go out March 12) Implementation in January 2020, if approved

6 How does it affect consumers/payers? Estimated average annual cost = $36-50 per person 5% retail tax = $0.40 on $8 six pack of beer $0.50 on $10 mixed drink $1.75 on $30 bottle of wine $2.50 on $50 bottle of liquor Visibility Paid in total by individual consumers Requires approval of registered voters in Anchorage the consumers Particular impact to two groups: underage drinkers and heavy drinkers

7 How does it affect the retailers? Demand for alcohol is inelastic Alcohol is already a regulated industry Point of sale adaptations, additional accounting, bond deposit to MOA Treasury Retail alcohol tax currently in ten other Alaska communities varies from 3% to 12% What is Brown Jug doing? We aren t selling golf balls or socks. We are selling a highly regulated product and with that comes corporate social responsibility.

8 How much money will it raise? A 5% municipal wide retail tax on alcohol is projected to raise $11-15 million dollars annually. Estimates of Tax Revenues from a Retail Sales Tax in Anchorage Based on Estimates of Taxable Sales

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10 Estimates of Taxable Sales for Anchorage High Estimate for Anchorage based on comparison to Juneau: Population Retail Sales Estimated Sales Per Capita 297,483 $295,252,408 $993 annual spend $82.75 monthly Low Estimate for Anchorage based on comparison to Fairbanks NSB: Population Retail Sales Estimated Sales Per Capita 297,483 $215,759,007 $725 annual spend $60.42 monthly Estimated average annual tax paid = $36-50 per person

11 How will the money be spent? Proposed ballot language Subject to Assembly approval every year Possible projects include

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13 How will I KNOW how the money is spent? Existing budget process includes detailed proposals from Administration, amendment and approval from the Assembly and public input this dedicated revenue would require the same process Programmatic Budget Controls Detailed report to the Assembly on annual expenditures Being appropriated annually allows for regular adjustment based on progress and public input

14 Other Questions Doesn t the State tax alcohol already? Why just alcohol? If it s such a good idea, why change from 60% to 50% voter approval? Isn t this a work around of the tax cap?

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