Tuesday, November 23, 2010

Indians Send State Budget Up in Smoke

As the Ithaca Journal reports, the state's ongoing failure to collect the tax on Indian cigarettes has blown a hole in this year's budget: "Legal challenges from the state's Indian tribes have kept New York from collecting any of the $150 million officials hoped to receive from the sales tax on cigarettes sold on reservations, pushing the state's enacted budget further out of balance. The state's Indian tribes are moving forward with their legal actions against the state, which has left the proposal in a state of limbo. "I don't think it was unreasonable to expect some cigarette tax revenue, but they had to know they weren't going to get it without a fight," said E.J. McMahon, the director of the Empire Center for New York State Policy."

This is the price you pay for fecklessness-and the governor's actions and inactions have come home to roost: "The state planned to start its long-sought enforcement of the tax Sept. 1. State lawmakers thought they were on solid legal ground when the plan was approved earlier this year, citing a U.S. Supreme Court case as precedent. But Indian tribes challenged the collection plan, which would have allowed reservation residents to participate in a coupon program. The revenue will not be collected directly from a reservation, but from the wholesaler.But after tribes raised objections, a federal judge in western New York placed issued two orders to halt the collection plan at all reservations."

What the state should have done was too threaten to cut off all state aid to these felons-and resisted raising the cigarette tax before the enforcement question was resolved. Instead, Paterson't follies have given Indian tobacco retailers a windfall that they are using to sue the state with-crying, in essence, with a full loaf under their arms.

Still, the state is left with reg egg on its face: "Earlier this month, state Division of Budget Director Robert Megna said lower-than-anticipated income tax revenues combined with soaring Medicaid costs created the mid-year hole. "The budget was tenuously balanced at the time," McMahon said. "Now the cards are beginning to tumble." But Megna also cited the lack of revenue from the collection plan. "The cigarette tax estimate was lowered to reflect the inability to implement enforcement on Native American reservations due to the current Federal Court injunction," Megna wrote in a report on the deficit."

Something that should have stayed the tax increase, but didn't: "Paterson pushed for collection of the tax, which exempts Indian tribe members, who can opt into a voucher program when purchasing cigarettes. The plan was coupled with a $1.60 hike on cigarettes sold elsewhere, and a tax increase for all tobacco products, from 46 percent of the retail price to 75 percent. The tax hike took effect July 1; the collection plan for Indian reservations was due to go into effect Sept."

Indeed. And NY tax payers are left holding the bag-not to mention the struggling convenience stores and their legal wholesalers. But we'll give Assembly Minority Leader Kolb the last word-a comment that is so confused that it defies understanding; but may underscore why Republicans remain so severely in the minority: "But Assembly Minority Leader Brian Kolb, R-Canandaigua, Ontario County, said he was skeptical the state would ultimately be successful. "You have judges not just in New York state, but around this country that are legislating from the bench," Kolb said. "The only people who are making money in this are lawyers."