Governor floats idea of cigarette tax increase

Indian sellers would get larger price advantage

Just days after a senior administration official dismissed as “rumor” talk of another increase in the state’s cigarette tax, Gov. David A. Paterson on Sunday floated the idea of raising the tax in an upstate radio interview.

The prospect of raising the state’s current $2.75-per-pack excise tax would give Indian retailers an even larger price advantage over non-Indian stores.

Paterson has declined to enforce a law requiring the state to collect taxes on discount cigarette sales by Indian retailers to non- Indian smokers.

Sources last week said Paterson may be looking at hiking the cigarette tax by as much as $1 per pack. New York City imposes an additional $1.50 per pack above the state level, not including state and county sales taxes.

Gov. David A. Paterson talks of tax devoted to health care.

Gov. David A. Paterson talks of tax devoted to health care.

Peter Kauffmann, a Paterson spokesman, last week dismissed as “rumor” a question about talk at the Capitol that Paterson may propose a cigarette tax increase of as much as $1 per pack when he unveils his 2010 budget plan in a week.

The governor Sunday told a Syracuse radio station that, as expected, he would not be proposing an increase in the state’s income tax. But he did not rule out a tobacco tax hike. “If things get rough, we might go back to a cigarette tax that would be devoted to health care. We would think about doing that,” he said in the interview.

The cigarette tax was raised by $1.25 per pack in 2008. The excise tax on a carton of cigarettes is $27.50 — meaning that Indian retailers have that level of pricing advantage built into every carton sale, since they do not charge the tax. A new tax hike without the state collecting the taxes on the Indian sales would provide Indian retailers with an even greater profit margin over non-Indian stores.

Paterson has said he will not enforce the Indian cigarette tax-collection law because he wants to negotiate a settlement with the tribes. His administration, though, has not yet started negotiations to resolve the decades-long dispute.


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