Kruger and Diaz: NY should collect all cigarette taxes

Tribal GroundsA Native American store on Long Island sells untaxed cigarettes, but some lawmakers are looking to force Native American-owned stores to charge taxes on cigarettes as a way to increase the state’s revenue. Senate Finance Committee Chair Carl Kruger asked the governor to begin collecting these sales taxes immediately.

Sen. Carl Kruger, D-Brooklyn, hand-delivered a letter Nov. 16 to the governor asking him to rescind a “letter of forbearance” that allows cigarettes sold on Native American land to be untaxed.

Kruger urged the governor to start collecting the taxes by Dec. 1. “The revenue estimated to be generated is more than $135 million for the month of December alone,” Kruger said.

He said about 40 million cartons of Native American cigarettes were sold untaxed in the 2008-2009 fiscal year, translating to a loss of as much as $1.6 billion to the state, pointing out a short-term, partial solution to the state’s estimated $3.2 billion deficit.

“It would be an instant way of bringing money into the state,” Kruger said. “People need to pay their fair share. We spend tens of millions of dollars of tax payers’ money on smoking cessation programs. My goal is that no one smokes, but if they are going to smoke, then they should pay the taxes due and buy their cigars and cigarettes in a lawful manner. We should impose a shared burden. Anything short of that is denying the rule of law.”

Kruger also said potential protests by Native Americans should not be the reason that lawmakers fear collecting cigarette taxes and said his proposal would “inflict the least pain on New Yorkers.”

“The denial of the collection of these taxes is no different than saying to somebody in Westchester County don’t pay your property tax and if you’re upset by that, then go out and picket about it,” Kruger said. “The people in Nassau and Suffolk counties don’t pay no property tax. We’ll give you too a letter of forbearance and if we rescind that letter, then maybe you will go and demonstrate on the Long Island Expressway.”

According to Kruger, the Native American cigarette tax revenue could go toward mental hygiene and senior programs as well.

Sen. Ruben Diaz, D-Bronx, supports Kruger’s plan, saying cigarette taxes are owed to the state. “It’s simple mathematics,” Diaz said. “We have been saying for years to collect sales tax on Indian land and we haven’t. Look at what it has brought us to.”

Kruger said every governor has failed in their attempt to collect Native American cheap cigarette taxes.

Morgan Hook, spokesman for Gov. David A. Paterson, denied that Kruger’s proposal would benefit the state.

“What the senators need to do is come up with realistic solutions to close the budget gap,” Hook said. “This will do nothing. There needs to be fiscally relevant budget solutions.”

Sen. John A. DeFrancisco, R-Syracuse, also opposed the Native American taxation. He said it is not a viable idea, because collecting Indian taxes would take time and would not help close mounting budget deficits.

Sen. Stephen M. Saland, R-Poughkeepsie, called Kruger’s idea a “one-shot solution out of the problem.” “If you think you can one-shot out of this by taxing Indian cigarettes it’s illusory,” Saland said.

However, Kruger admits his proposal is not the complete solution to the budget deficit. “We need to reform government; perform services better; we have to streamline the way we produce our goods and services, but at the same time, we have to ask everybody to share both the benefits and the burdens of being a New Yorker,” he said. “We should collect the taxes before we cut services.”

The letter of forbearance was issued by former New York State Tax Commissioner Andrew Eristoff in 2006. It said all cigarettes sold by Native American tax retailers will be exempt from tax.

Kruger stressed the importance of clarity and transparency in government and the importance of removing “the big, black cloud of smoke” looming over the Legislature. “We should be forthright in our negotiations and most importantly, honest,” he said. “Let’s open up the windows and let’s have the light of day shine upon the process. There is no cost to the state, only benefit.”


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