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Thursday, June 05, 2008

New York: Highest Cigarette Tax in All the Land

Taxes just continue to climb higher in the state of New York, with elected officials – from localities to state government – seemingly oblivious to the negative economic effects.

For example, the state’s cigarette tax jumped on June 3 from $1.50 to $2.75 per pack. That’s an 83 percent increase.

By the way, New York City piles on with its own tax – which means the total per pack tax in the city is $4.25. That’s the highest tax in the nation.

Whoops, I almost forgot. The state and city sales tax has to be added on as well.

One of the groups affected by these high taxes, that politicians apparently choose to ignore, is small business, in particular, small retailers. Higher tobacco taxes mean less business, and fewer consumer dollars available for other purchases. That’s bad news for these small enterprises.

Consider key points from a Schenectady Daily Gazette June 1 article:

• Starting Tuesday, the cost of a pack of cigarettes will jump $1.25 because the state tax is increasing from $1.50 per pack to $2.75 per pack. “The timing is as bad as it can possibly be,” James Calvin, president of the New York Association of Convenience Stores, said Friday. People who smoke and don’t quit to protest the higher taxes will find cheaper sources for their cigarettes, including Indian reservations and border states with significantly lower taxes, he said. “The primary concern all along for us has been the reservation tax evasion and how that is going to dramatically affect sales in convenience stores,” Calvin said. Calvin said the group thinks the average store will lose 30 percent of its sales volume after the tax hike goes into effect. The number will vary depending on the proximity of the store to border states or reservations. “But everybody is going to lose a lot of cigarette sales,” he said, sales that retailers depend on to generate traffic in their stores and, consequently, additional purchases.

• Avinash Moudgil, owner of the MUD Deli in downtown Gloversville, said rising taxes and slumping sales can be a lethal combination for a small business. “You have to find some other way to make a living,” said Moudgil, who has run the business for seven years. “Bills are going higher and higher, taxes are going higher and higher. Where do you get the money?”

But the costs do not stop with smokers and small business owners. More dollars generally being diverted from the private sector to government has an overall negative impact on the economy.

Also, when taxes are pushed this high, there is the matter of sales being pushed underground. Smuggling and crime increase. The Gazette article noted:

• Tom Bergin, a spokesman for the state Department of Taxation and Finance, said … officials do know that criminal trafficking will increase as a result of the tax increase. The state arrests hundreds of people a year for transporting or selling untaxed cigarettes. “Our response is to go after those traffickers very aggressively. We always work closely with local law enforcement authorities,” he said.

A final point is worth highlighting. The June 3 New York Post reported the following in response to the tax hike:

• Audrey Silk, of Citizens Lobbying Against Smoker Harassment, said the increase is "un-American" because it's designed "to reduce the number of smokers, which is none of their business to do."

Imagine that, someone making the case for individual freedom and against the Nanny State.

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