New York State tax increase turn smokers to Indian reservations and neighboring states

Sales of cigarettes in legal points of sale have dropped a dramatic 27 percent across the state after the largest cigarette tax in the New York smokersU.S. was implemented this July, a Post analysis shown.
Law-abiding retailers have sold approximately of 30 million packs of cigarettes per month from July to December — nearly 11 million fewer compared to the period before Gov. Paterson and the Legislature increased the state excise tax on cigarettes up to $4.35 per pack in a desperate attempt to collect extra revenue for the cash-starved budget.

Such a decline in cigarette sales would surpass even the wildest hopes of anti-smoking groups, who estimated the implementation of the tax increase, bringing the average price of a cigarette pack to $10 would sink sales by up to 10 percent as cash-shorted smokers cut back or give up smoking.

However, the experts are not so optimistic on that, saying that it is more likely that smokers have simply turned to neighboring tax havens that permit them to stockpile less expensive cigarettes, contributing to the state treasury misses so-needed revenues. Both neighboring Pennsylvania and Vermont, which are home to substantially lower taxes on cigarette, have seen cigarette sales growth since New York’s tax increase, The Post’s analysis discovered. Due to the tax increase, the average price of one pack of Marlboros rose to $11.60 across New York City versus $5.93 per pack in neighboring Pennsylvania.

According to the present report, in August NY retailers confirmed sales went down by staggering 45 percent in points of sale located on the borderline with states with low taxes on cigarettes such as Pennsylvania and Vermont; in addition smokers turned to tax-free cigarettes sold in Indian reservations across the New York State.

Several reports claimed sales have been soaring up in Indian smoke shops, where Tribal Nations have so far impeded Gov. Paterson’s efforts to impose taxes on cigarettes sold to non-members of the tribes.

“We have warned the lawmakers that it would happen, and now it is indeed happening,” admitted James Calvin, spokesman of New York Association of Convenience Stores. “Every time excise tax goes up, smokers opt for that dark, backstreet, unregulated, untaxed trade in cigarettes on the streets. This measure is obviously self-defeating.”

In case the tendency continues, New York State may fail to collect the $260 million revenue Paterson estimated from the 58 percent tax increase. The hike has generated only $13.8 million each month so far, in conformity with state sales numbers, meaning the policy could be short of as much as $136 million by March 31, 2010.

Erik Kriss , Budget Department spokesman confirmed that fiscal analysts predicted a 22 percent decline in cigarette sales in their estimates, so they believe they would reach the target amount for the fiscal year. Budget Department did recently decrease by $113 million the amount expected to be collected by taxing cigarettes sold in reservations.

That measure has been stuck in the courts, with tribes challenging it on grounds that it violated their sovereignty.

By Ann Zaretskii

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