New York Reaches Deal to Raise Cigarette Tax

Governor Patterson proposes $1.60 per pack cigarette tax increase, a move that could raise cigarette prices to more than $10 a pack in New York City.

June 22, 2010

ALBANY, NY - Under a new proposal by New York Governor David Patterson and state legislators, cigarette taxes in New York State would increase by $1.60 a pack. The proposed new rate of $4.35 per pack would be the nation€™s highest state cigarette tax, the Daily News reports. New York City has an additional $1.50 per pack tax.

Paterson€™s proposal would also raise wholesale taxes on chewing tobacco, bringing its tax in line with those of cigarettes.

If the proposal passes, cigarettes purchased in New York City would include total taxes of $5.85 per pack, the nation€™s first city to break $5, and would result in packs of premium cigarettes costing more than $10. Patterson€™s legislation also includes a plan to begin collecting taxes on cigarettes sold by Indian reservations, a plan that has sparked continued debate.

Patterson maintains that the proposals would generate $440 million in revenue this year, helping reduce the state€™s $9 billion budget shortfall. However, whether he has the votes to approve the plan in the State Senate is uncertain, as Republicans have threatened to oppose any plan that includes tax increases. Additionally, some Democrats oppose efforts to tax cigarettes sold by the tribes.

"Our anticipation is that the budget extender will pass, that people will not want to shut down government," said Robert L. Megna, the state budget director, who said failure to pass the proposals would result in almost certain closure of government services.

New York State currently imposes a cigarette tax of $2.75 a pack. Patterson had proposed raising the tax by $1 a pack back in January, a plan that was opposed by the Senate but supported by the State Assembly.

Tobacco retailers oppose a cigarette tax increase, maintaining it will only fuel black market sales. "That large of an increase will further devastate legitimate retail sales of cigarettes and only serve to create more widespread black market cigarette sales and crime in New York," said Thomas Briant, executive director of the National Association of Tobacco Outlets.

The Seneca Nation has also expressed concerns about taxes that affect its Nation€™s tobacco sales.

"Certainly we are going to stand up and fight and do everything possible for that not to happen," said J. C. Seneca, a tribal councilor for the Seneca Nation. "We have to protect and honor the treaties that were made by our ancestors, and that€™s what we€™re going to do...If the state wants to move in that direction, then really we have no choice but to defend our territory and our people€™s rights."

Megna said the state would tax cigarette wholesalers who sell cigarettes to Native American tribes, who would then be allotted a certain amount tax-free for their residents.

"We would hope that there would not be any violence," Megna said. "We€™re trying to minimize any violent activity and make it clear that their product for their consumption is tax-free. The only thing we€™re trying to tax is New York State residents€™ consumption of taxable products."

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