State Legislature Passes New Cigarette Taxes

Albany, NY – The New York State Legislature was approved a weekly emergency
spending bill to keep government running. It includes, at the
direction of Governor David Paterson, new taxes on cigarettes, and
the authorization to collect taxes on tobacco sold to non Indians on
tribal lands.

Governor Paterson, continuing his recent tactic of placing parts of
his budget in the weekly emergency spending bills, gave legislators
the choice of approving steep new taxes on tobacco, or shutting the
government down.

The taxes include an additional $1.60 a pack tax on cigarettes, and
new taxes on cigars, snuff, and other tobacco products. It would
also, for the first time, authorize a plan to collect the tax on
cigarettes sold to non Indians on Indian lands, something that has
eluded several past governors.

During debate on the Assembly floor, the ranking Republican Ways and
Means committee member Jim Hayes, says the process is "spiraling out
of control", and gives New York the "dubious distinction" of having
the highest cigarette taxes in the nation.

"You've never met a tax you didn't hike," quipped Hayes,

Ways and Means Committee Chair, Democrat Denny Farrell, admits the
tax is high, but says it has the joint benefit of discouraging
smoking, and raising money for health programs.

"It's a win win tax," said Farrell.

The measure passed by a significant margin in the Assembly. In the
Senate, one Republican, Senator Roy McDonald of Saratoga, voted with
all 32 Democrats to approve the new taxes 33 to 28.

Joe Murillo, with Altria- Phillip Morris, calls the tobacco tax
package a "massive unprecedented tax increase", that won't bring in
the revenues that lawmakers predict. Murillo says the additional
$1.60 per pack tax on cigarettes, combined with New York's already
highest in the nation taxes on tobacco, will only lead to more
underground sales and smuggling.

Russ Sciandra, with the anti smoking coalition New Yorkers for a
Tobacco Free New York, which supports the new taxes, says the
provision to finally collect the sales tax on cigarettes sold to non-
Indians on Indian lands will put a big dent in the underground
cigarette market. He says the collections involve requiring
wholesalers to pay all of the taxes on the cigarettes upfront, then
issuing coupons for Indians to essentially get a discount when they
purchase cigarettes at tribal stores.

The bills also includes a clause that allows Paterson to negotiate
settlements with Indian tribes for a different method to collect the
payments, or to include the tax payments as part of a larger deal on
gambling casinos or other items. The convenience store group that has
long backed the collection of the taxes, known as "Enforce the Law,
Collect the Tax", opposes that provision. They say it could lead to
tribes selling cigarettes that they manufacture themselves, without
paying the tax, and would continue what they view as unfair
competition by the tribes.

Both opponents and supporters do agree on one thing. They estimate at
least one third of all cigarettes now sold in New York are purchased
without buyers paying the state mandated taxes.