In hopes of capturing more revenue from the 1.2 million cruise ship visitors expected in Ketchikan this summer, a cooperative group of city and borough officials proposed removing the tax cap on jewelry.
The Ketchikan City Council was to vote Thursday on whether to move forward with that plan. But after some strong public comments against it, decided to delay voting, and seek more information.
There is a $1,000 boroughwide sales tax cap for single-item purchases. That cap has not changed for about 40 years. There have been attempts in the past to raise it for all single-item purchases, but so far none of those attempts has succeeded.
Some downtown business owners said this current proposal singles out a specific type of store, which is not fair.
Jay Ellis of Julie’s Fine Jewelry and Gifts said his store is one of the few jewelry stores in Ketchikan that remains open year-round. He said removing the tax cap on jewelry alone feels like a personal attack.
“Jewelry is a luxury item. Yes, that’s true,” he said. “So is the outboard on your boat. So is the couch in your living room that you bought from Tongass. So is the TV you bought from Wal Mart. Why is jewelry alone getting pinpointed? If you’re going to lift it on jewelry, lift it on everything.”
Jai Mahtani of Gold Rush Jewelry said removing the tax cap on jewelry is like killing the goose that lays golden eggs. He said there are people on board the ships that work with chain jewelry stores.
“They will guide them to go to their stores in Juneau and Skagway by claiming, ‘Hey, Ketchikan just lifted the cap.’ Our only leverage was the cap,” he said. “What will happen? You will kill the small stores.”
Both store owners said cruise visitors also can buy jewelry on board the ships, which can open their stores when they are a certain distance from a port.
They added that some chain stores will send a piece of jewelry to a representative on the ship, so a customer can pay on board and completely avoid local sales tax.
Council Member Mark Flora said while he sympathizes with local jewelry store owners, tourists buying high-priced jewelry is the “definition of disposable income.” He said while the 1.2 million cruise visitors come here for their vacations this summer, local residents will still be paying a diesel surcharge for electricity, as well as other high local costs.
“I think it’s really important that we look for ways to start growing some revenue not on the backs of the locals, and try to give some of those folks a little bit of relief,” he said.
Other council members, though, were concerned about targeting one group. Council Member Dave Kiffer asked whether the city and borough committee considered options.
Flora, who is on the committee, said they discussed raising the cap on everything except rent, raising sales tax overall, but seasonally; and whether Amazon starting to collect local sales tax would make much of a difference.
Flora said a concern with raising sales tax overall, even seasonally, or raising the cap on all items was the increased burden on local year-round residents.
The council eventually agreed to postpone voting on the proposal, and to investigate the sales tax cap in other communities.
CoastAlaska member station KTOO reports that in 2015, Juneau raised its sales tax cap from $7,500 to $12,000, and added a stipulation that the cap automatically adjust for inflation. Also in 2015, Juneau officials voted to remove the tax cap for jewelry.