New York state must start collecting unpaid cigarette taxes

Westchester residents awoke on a recent morning to news that Westchester County is facing a $60 million budget hole.

Just weeks into 2010, and we’re already behind — by a lot.

The grim news was delivered by newly elected County Executive Rob Astorino, who has the unenviable — and always unpopular — task of reining in spending wherever he can. Facing a $60 million deficit just weeks into his term, County Executive Astorino’s job just got a lot tougher.

Westchester is not alone in projecting 2010 deficits. Governments across the state are feeling the pinch of declining tax revenues. It’s what happens when businesses, and the jobs that go with them, are taxed out of the state year after year.

But even higher state taxes are on their way.

Just two weeks ago, Gov. David Paterson proposed $1 billion in new taxes and fees for New Yorkers. And, as usual, Westchester residents — the highest taxed people in America — can expect to pay a disproportionate share of that burden.

The governor also proposed about a billion dollars in education cuts, and another billion in health-care cuts. Expect much of those costs to get passed down to the counties and individual school districts.

There’s no question about it: New York state has become a taxing machine. We’ve taxed everything in sight; we’re even going after soda pop now.

So with all the budget pain and new tax proposals out there, one would think that the state would actually be collecting the revenue it is due.

Well, one would be wrong.

An estimated $1 billion in cigarette taxes goes uncollected every year in New York. Some estimate the unrealized revenue as high as $1.6 billion.

The lost taxes are from kent-cigarette sold on Native American reservations in New York or online (even though that’s illegal in New York) by Native American tribes.

This is not a matter of sovereignty. New York has the power to collect tax on cigarettes that are sold to New Yorkers — whether those cigarettes come from another state, another country or even a reservation. The Supreme Court said so.

Almost everyone in state government agrees that these taxes should be collected. It’s been a topic of discussion in Albany for years. But New York continues to leave this money off the table. We are virtually alone among states in not collecting this revenue.

Gov. Paterson could begin collecting these tax dollars tomorrow and a.) eliminate his proposed tax increases, b.) restore funding to our schools, or c.) eliminate the planned health-care cuts. What is he waiting for?

(As part of his executive budget released in January, Paterson announced he would order his tax department to draft regulations to enforce a 2008 law intended to stop wholesalers from selling untaxed cigarettes to tribes. That would force Indian retailers who currently don’t charge the state’s $2.75-per-pack excise tax and 4 percent sales tax to pay more to suppliers up front and ultimately raise their prices. — Editor.)

The black market cigarette trade has exploded in New York in recent years because taxes on tobacco products have grown so high. Fully a third of all cigarettes sold in New York state are now purchased through the Indian tribes, according to studies. And illegal sales are about to increase.

Gov. Paterson just proposed another $1 per-pack tax hike on cigarettes sold here. It will only exacerbate an already terrible problem. The higher the taxes, the higher the incentive to avoid the tax.

New York City Mayor Michael Bloomberg testified in Albany on Jan. 25 in favor of collecting the cigarette taxes. Like County Executive Astorino, Mayor Bloomberg is facing hard choices. In his recent budget blueprint, he proposed shuttering schools and firehouses to close the city’s growing budget gap. That’s tough stuff. But with the declining Wall Street revenues, the mayor is left with few choices.

High taxes and spending are ruining New York state. But with the deficits we’re facing now, it defies reason not to collect taxes already on the books, taxes that are legally owed.

We can’t afford to wait any longer, Gov. Paterson. We need you to step up and start collecting the cigarette taxes now.


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