Monday, April 06, 2009

Taxing Habit

As we have been arguing for over a decade, rising cigarette taxes are killing small stores, while creating a thriving black market for Indian retailers. At some point, there will be a law of diminishing returns-something that the NY Post pointed out yesterday: "As smokers dwindle so will the money, says Thomas Briant, executive director of the National Association of Tobacco Outlets. "It's really a declining revenue source," Briant says. "Increases in cigarette and tobacco taxes are reaching a point of diminishing returns, often not generating the amount projected."

And of course, the transfer of sales to illegal Indian sources, deprives NY State of over $1 billion tax dollars: "Altria spokesman David Sutton also argues that tobacco taxes are "a very questionable revenue stream" for government programs. "It's quite likely the $35 billion [earmarked for children's health insurance programs from tobacco tax revenue] will not be realized. When you increase the tax level, consumers change their behavior," perhaps seeking to avoid paying more rather than quitting. "In New York, instead of going to the bodega, folks go to the Native American reservation, who don't pay the tax, or go online, or to another state, or buy counterfeit or contraband product."

With the state's budget still out of whack-and an adjustment expected to be needed as early as June-this is money left on the table that can no longer be ignored; especially when it's likely that some unappetizing service cuts will have to be made. Here's hoping that the assembly and the senate get together and force Governor Paterson to come up with a workable methodology to -end the Indian tax rip-off.