New York State Passes New Tobacco Taxes to Keep Government Running

NEW YORK -- The New York State Legislature approved an emergency budget measure this week giving the state the highest cigarette tax in the nation. Beginning July 1, the new law adds $1.60 in state taxes to the price of every pack of cigarettes sold in New York.

The tax will push the average price for cigarettes in the state to about $9.20, with prices in New York City hitting nearly $11 a pack because the city imposes its own cigarette tax.

By a vote of 77-64 in the Assembly and 32-30 in the Senate, lawmakers approved Governor David Paterson's proposal to:

-- Increase the state excise tax on cigarettes from $2.75 a pack to $4.35.

-- Increase the state excise tax on cigars and other tobacco products from 46 percent of wholesale value to 76 percent.

-- Increase the state excise tax on snuff from 96 cents per ounce to $2.00 per ounce.

-- Reclassify "little cigars" as cigarettes for tax purposes, making them taxable at $4.35 a pack.
Lawmakers expect the higher taxes to generate more than $500 million in additional revenue for healthcare programs and cancer research.

The tobacco tax hike was included in the 12th emergency budget bill approved since the state's fiscal year began April l.

James Calvin, president of the New York Association of Convenience Stores (NYACS), said that right now, half the cigarettes consumed in New York are purchased without collection of any New York State tax, and that these increases will likely push that to two-thirds as even more smokers flee tax-inflated prices and buy from Indian reservations, border states, the Internet, or the black market.

"I honestly think the governor and legislative leaders, for whatever reason, consciously decided to chase all cigarette sales to the tax-free side of the street," he said. "There is no other plausible explanation."

A NYACS economist has estimated that the state loses $1 billion a year due its failure to collect taxes on Indian sales of cigarettes to non-Indian customers -- even though existing state law requires the tax department to collect those taxes from their wholesale distributors.

"This is a 58 percent tax hike, so they just increased the value of those lost taxes to $1.5 billion," Calvin pointed out.

The bill that passed Monday does outline a plan to start collecting taxes on Native American sales of cigarettes to non-Indians starting Sept. 1, 2010, "but implementation dates have come and gone before without any action whatsoever by the tax department, and there's no reason to expect this one will be any different. In New York, there's always a fixed date for a cigarette tax increase to take effect, but a 'someday' timetable for enforcing tax collection equally."

"Only in New York would the government decide to launch a major initiative in September to fix the cigarette tax evasion problem but make a move in July that will make the cigarette tax evasion problem 58 percent worse," Calvin said.

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