Monday, March 23, 2009

Talk About Leaving Money on the Table

In Albany today we will be joining the New York State Association of Convenience Stores (NYACS) in a press conference highlighting the fact that the state has a round a billion dollars in untapped funds it's not even trying to get at during this budget crisis-untaxed Indian cigarettes. As the NYACs press release tells us: "Supporters of fair tax collection today released an economic study confirming for the first time that the hemorrhage of State revenue resulting from untaxed sales of cigarettes by Native American tribes has now reached $1 Billion a year.
The analysis performed by Brian O’Connor Ph.D. for the New York Association of Convenience Stores shows that if the Paterson administration were enforcing the existing state law requiring collection of cigarette taxes on tribal sales to non-Indian customers, it would yield new tax revenue “in the proximity of $1 billion.”

Incredible! And no one has used the current crisis to simply implement a workable scheme to tap these funds at the source-the manufacturer who ships the product directly into the state: "Calling it “the forgotten billion-dollar stimulus,” NYACS and allies in the quest to bring about fair tax collection held a press conference in Albany today to urge Governor Paterson and legislative leaders not to forego this major source of new revenue as they negotiate a new budget due to take effect April 1. “With businesses and consumers being asked to absorb billions in spending cuts, new taxes, and fee increases, it would be fiscally irresponsible to craft a budget without tapping into this recurring revenue stream,” said James Calvin, President of the New York Association of Convenience Stores."

And on top of this, the state is proposing that cigarette licensing fees-for those legitimate, tax paying retailers-be boosted by 900%. making it even more difficult for them to compete against the tax cheats. As we said over a month ago: "At a time when the state and city have still failed to properly interdict the illegal black market sales-particularly from Indian retailers-it is unconscionable to punish the law abiders even further; as if these fees in an economic recession were ever justifiable. The reality is that the city's 13,000 bodegas are hurting badly-with many on the verge of bankruptcy. To propose such a fee hike now means that the governor is simply out of touch with the very same streets that he grew up in-and the retailers who insure that neighborhoods remain vibrant and stable."

Which is precisely what the NY Daily News highlights this morning: "Gov. Paterson wants to snuff out cigarette sales by drastically raising fees for stores that sell them, the Daily News has learned. Paterson's budget office projects cigarettes and other tobacco products would be sold at 40% fewer stores if his proposal is adopted."

Can you say, major disconnect? As we told the News: "Richard Lipsky, spokesman for the Neighborhood Retail Alliance, warned the proposal wouldn't stop people from smoking but would boost sales on the Internet and black market." So much for what the governor describes as a "health care initiative." Not only is it not going to accomplish its health care objective, it will drive another nail into the health of local small stores.

So instead of this misdirection, the governor and the legislature needs to grab the $1 billion on the table-and save the small businesses from unnecessary further misery. This is a path that all clear thinking legislators should pursue with vigor.