Thursday, August 12, 2010

Up in Smoke!

When we talked about this being the summer Of Indian love-owing to the governor's stupidity in raising the cigarette tax before putting any tax enforcement in place-we knew what we were talking about: "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."

And now comes the confirmation-from today's NY Post: "Tax-choked smokers are fleeing over the border and onto Indian reservations in search of discount cigarettes and sending Gov. Paterson's anticipated tax windfall, well, up in smoke. Cigarette sales statewide have tumbled by nearly a third since New York's highest-in-the-nation cig tax of $4.35 took effect on July 1, according to state tax data and sales reports released yesterday by retailers."

If this weren't so tragic to all of the already beleaguered retailers and wholesalers, it actually would be funny-farcical in its stupidity. And the enforcement regime, as we pointed out yesterday is still yet to be put into effect-with the Seneca making war whoops. As Capitol Tonight reported yesterday: "The Seneca Nation is calling Monday’s seizure of a truck carrying cigarettes to their territory an illegal act. Seneca Nation President Barry Snyder held a news conference late this morning to present the Nation’s side of the story. They say they had proper stamps for their cigarettes, under Nation guidelines. But yesterday, a spokesman for the Taxation and Finance Department claimed that the cigarettes didn’t bear a New York State tax stamp, and that is why they were seized. All this comes as the Seneca Nation is actively fighting against the Prevent All Cigarette Trafficking Act. A recent court decision found it illegal for the Nation to mail out cigarettes, but also ruled that the state cannot collect taxes on the cigarettes."

What's the Seneca word for chutzpah? Whatever it is Chief Snyder embodies it with this statement: "The Nation does not take lightly this overt act of State aggression against the Nation and its people,” Snyder said. “We will weigh all of our options and determine what steps to take to protect and preserve the sovereign right of the Nation and the Seneca people.”

This should lead to the governor of the great state of New York to issue a Clint Eastwood, "Make my day," warning-but he;'s too busy feting Charlie Rangel and looking to negotiate with the very Indian scam artists that have been ripping off the tax payers for years. Come to think of it, there is a compelling synergy between his fronting for Rangel as well as for the tax avoiding buttleggers. But the failure of the state in this matter is a serious issue that can't be swept under the rug.

NY State is in dire need of the now evanescent funds: "New York state sold 28.7 million cigarette tax stamps in July, down from 43.1 million the previous year, said a spokesman for the state Department of Taxation and Finance. That translates to $125 million in cig-tax revenue last month, barely more than the $119 million haul in July 2009 despite the massive tax hike."

And check out the mass migration: "Combined with New York City's own cig levy, there's now a $5.85 tax on packs sold in the five boroughs. "I come to Pennsylvania because it's so much cheaper," said Jeff Hochteil, a trucker from upstate Walden, NY, who saves nearly $50 each time he makes the 30-mile drive to Matamoras, Pa., to pick up cartons of smokes."

So now the question is, what is the governor and the legislature going to do to staunch the bleeding? We commented yesterday about the closing of Finkle Distributors in Jamestown, and if nothing is done, that will be just the begging of the business exodus-unless strong, swift action is taken to implement the enforcement rules immediately. And the request of the tax stampers to get an additional 10 cents a pack handling fee to cover all of their additional up front costs needs to be honored before all that's left of the wholesale industry are the black marketeers .