Monday, June 21, 2010

Indian Summer of Love

We have just been briefed by our good friend Jim Calvin concerning the details of the governor's proposal on the cigarette tax increase and the tax enforcement of Indian tobacco retailing-and it's much worse than we had imagined. In essence, Davis Paterson, by having the tax implemented on July the First, but delaying any enforcement until September, is giving the buttleggers a wonderful summer of love-an opportunity for the Indians to get really fattened up on the $16 a carton tax increase that goes into effect on July 1st.

In addition, as the following memo from Calvin details, the extender also gives the governor unilateral power to negotiate all enforcement issues with the Indians-without any legislative approval or oversight. A recipe for total disaster.

Here's Calvin's memo:

Dear Association Colleague:

Over the weekend it went from bad to worse on the tobacco tax front.

Included in the Governor's budget extender bill, to be acted on TODAY by the Legislature, is a $1.60-per-pack increase in the cigarette tax, an increase of the OTP tax from 46% of wholesale to 76% of wholesale, and reclassification of little cigars as cigarettes for tax purposes.

On the positive side, it does contain specifics of a plan to collect taxes on cigarettes sold by Indian tribes to non-Indians. But the effective date for that collection is September 1st, while the tax increases would be effective next week - July 1st. (There would be a floor tax on cigarettes in inventory at close of business June 30, payable September 20.)

Why would you launch an initiative to fix the cigarette tax evasion problem on a given date but deliberately make the tax evasion problem 56% worse two months before that?

The bill goes on to say that the Governor would have unilateral authority to enter into a permanent negotiated out-of-court settlement with Indian tribes on taxation issues WITHOUT getting it ratified by the Legislature -- that's really dangerous. The Legislature previously refused to give Governor Pataki this carte blanch authority, and with good reason, because he was ready to give away the farm.

I encourage you and your members to contact your state Senators THIS MORNING at their Albany offices to voice opposition to the tobacco tax increases as well as the carte blanch provision for the Governor. The extender bill will be acted on this afternoon.