Monday, July 28, 2008

Indians: Take a Hike!

In Saturday's NY Post, the paper continues to blast away at the MTA and its lack of managerial competence: "Here we go again: Seems like only yesterday (actually, it was March) that the MTA socked riders with a steep fare hike. Yet now it's expected to ask to do so again next July - six months sooner than planned. Ouch! This time, Executive Director Elliot Sander & Co. want jumps of about 8 percent - depending on what the state and city are willing to kick in (assume: zero). Should riders have to pony up so soon - and so much? Not until the agency gets its house in order - starting with plans for keeping its equipment fit and completing its many upgrades and expansion projects. Not until it can spell out how it's going to get the money it says it needs - some $30 billion over five years - to do that."

Which brings us to Mayor Bloomberg's suggestion that the MTA could plug its budget shortfall by tapping into the uncollected Indian cigarette taxes. As the Gothamist points out: "Hizzoner said yesterday that the cost of subway and bus rides won’t have to go up much at all if the state collects taxes on cigarettes sold on Indian reservations. "That just alone would replace one of those fare increases," Bloomberg told reporters, insisting that the tobacco revenue could plug a $700 million hole in the MTA’s budget."

Indeed it could; and if lawmakers get their act together than its possible that there could be a continual tax stream for transit needs. What should be done here is for the State Department of Taxation and Finance to conduct an accurate accounting of the black market sales that are currently taking away from the revenues of legitimate store owners. Once completed, the state will have a good idea of the amount of loses that the non-taxed sales amount to.

What's clear is that the state may not realize just how much it is missing because of its nonfeasance in this matter. As the NY Sun has reported: "A 2007 report by the Independent Budget Office, a nonpartisan city agency that analyzes the city's finances, found that 27% of city smokers and 34% of upstate smokers sometimes bought "under-taxed" cigarettes in 2006. These smokers avoided the tax by buying cigarettes from other states, ordering cigarettes over the Internet, and purchasing cigarettes at Indian reservations. The city lost an estimated $40 million in tax revenue as a result of cigarette tax evasion in 2006, according to the report." We believe that the dollar amount's a great deal larger than that.

This gap between taxed and non-taxed cigarettes-a number that we estimate is probably north of $500 million a year-should then be used as the benchmark for a dedicated fund earmarked for transit. A fund that should be part of a comprehensive overhaul of the transit agency's operation. NO more money until, as the Post says: "Not until an adult like Richard Ravitch and his panel figure out how to get beyond the never-ending MTA funding woes and craft a plan to ensure long-term fiscal soundness for the system."