Monday, August 24, 2009

Senate on the Warpath?

It looks as if the State Senate may be getting serious about the uncollected taxes on Indian retailers-amd the refusal of Governor Paterson to man up on the issue. As the Times Union reported last week: "In the latest example of how not even Democrats are cozying up to Gov. David Paterson these days, Craig Johnson, the Long Island Democrat who heads the Senate Investigations Committe, wants hearings on the lack of tax collections. This comes in the wake of a story earlier this week in the Buffalo News noting that Paterson has quietly written off the estimated $65 million it could have gotten by taxing Native American cigarette sales."

Now Paterson isn't alone in this example of shameful timidity; after all, Governors Paptaki and Spitzer was as equally pusillanimous. But the state's budget is now in free fall, and revenue needs to be found someplace; and Senator Johnson's doing the right thing: "Senator Craig M. Johnson, chairman of the Senate Standing Committee on Investigations and Government Operations, announced today plans to hold a hearing on the state’s long-unsuccessful attempts to collect taxes from cigarettes sold to Non-Native Americans on Indian reservations. This move was prompted by news that the Paterson Administration has quietly written off collecting this revenue — a move that is in direct violation of a law that the governor himself signed last year. The failure to collect this revenue is costing the state $65 million this year, according to the state Office of the Budget."

That $65 million number is a really low ball figure, however-and convenience store industry sources estimate that the state is losing closer to $600 million every year because of the state's failure to confront Indian tax avoidance. As Johnson says: "We literally can’t afford to look the other way, nor should the state Department of Taxation and Finance ignore a law that is barely a year old,” Senator Johnson, (D-Nassau,) said. “This Committee wants to be helpful in finding a solution, but the public also deserves to know where things stand between the state and Native American retailers and why there has yet to be an agreement.”

And Senators Klein, Stachowski and Griffo also weigh in on this crucial revenue issue-one that also impacts local convenience stores who can't compete with retailers who aren't charging taxes on their cigarette sales. Griffo's statement is to the point: "Griffo noted that according to some estimates, New York fails to collect $400 million a year in sales taxes on cigarette sales to non-Indians at Indian-owned businesses. “What this can mean to the state, and also to the local communities in Oneida County that should have been sharing in this money for 14 years, is very important given our current fiscal crisis,” Griffo said. “This is also a very important issue for the small convenience stores located near Indian-owned businesses. There should be a level playing field for them in which to compete.”

In NYC, this issue has a particular resonance as local bodegas are fighting to stay in business even while a major source of their revenue-over $250 million a year in cigarette sales-has literally gone up in smoke, lost to a burgeoning black market that blatantly sells illegal smokes right out on the sidewalks in front of the struggling stores. All of this is a consequence, of course, of Mike Bloomberg's confiscatory cigarette tax policy in the city.

As we told the NY Times seven years ago: "Richard Lipsky, a lobbyist for the owners of small delis, bodega owners and convenience stores, predicted in an interview that many neighborhood stores would not survive the higher tax as many smokers would buy their cigarettes over the Internet, from Indian reservations, from adjoining states or from smugglers." And so it went-but the least the city and the state can do is to insure that everyone who sells tobacco products pays the heavy freight.

And not to mention also, the fact that it has been determined that a good percentage of the black market money has been channeled into terrorist activity. As the NY Post reported last year: "Nearly two dozen Arab cigarette smugglers have been smoked out for buying and then reselling contraband butts to New York bodegas and other shops. Lured by fake ads in Arabic-language newspapers, the smugglers bought $6 million in contraband smokes from New York tax and federal undercover agents."

And the money is flowing: "And a top elected official now warns that the untaxed cigarettes could be funding terror overseas. All the profits of the smugglers - whose sales to hundreds of area stores exceeds the business of most legitimate wholesalers - "was shipped overseas to the Middle East," said Deputy Commissioner William Comiskey of the state Taxation and Finance Office. "We know that the money wasn't kept here," said Comiskey, whose agents conducted the elaborate sting, noting that "it's a possibility" that the smugglers' multimillion-dollar operations, which also include sales of guns and counterfeit tax stamps, could be at least partly funding terrorism."

Does this Comiskey fella still work for the state? If so, maybe he should send a message to our chief executive-hint: he's hiding under his desk-that his inaction is shameful. So it's about time that the senate stood up on this issue. With another two or three billion dollar shortfall facing the state this fall, it is simply unconscionable for the governor to refuse to act-in our view, it is an impeachable offense.

As Senator Griffo told the TU: "“First and foremost, the tax should be collected. The law of this state says sales of tobacco products to non-Indians should be subject to sales tax. “I don’t know how the Administration can pick and choose which laws they want enforced. Existing law is intended to be abided by, not to be negotiated. I can’t imagine what would happen to employers that went 14 years without obeying the law. We can’t just ignore the law. If the Administration thinks the law is wrong, the redress open to him is to go through the political process to enact a new law, not to simply give up on making the law work.”

It's time for action-and Paterson needs to be confronted so that the law is enforced. The bell is tolling on the governor's nonfeasance.