Cigarette Tax Evasion Remains Rampant in New York
State Losing $1.7 Billion in Tax Revenue, 6,700 Jobs
ALBANY, NY (12/13/2012)(readMedia)-- Chronic cigarette-tax evasion continues to cost New York State at least $1.7 billion a year in tax revenue and 6,700 jobs, according to a new report from the New York Association of Convenience Stores.
Commissioned by the NYACS, the economic study by John Dunham & Associates determined that in 2011, one of every two packs of cigarettes consumed in New York State escapes collection of New York State taxes.
"This is further proof that New York, which has the highest cigarette excise tax in the nation, continues to suffer the corrosive economic and fiscal effects of the worst cigarette tax evasion in the nation," said NYACS President James Calvin.
"This epidemic costs our state and local governments hundreds of millions of dollars in tax revenue annually, deprives tax-collecting retailers of legitimate business, and siphons away private-sector jobs," he said. "Moreover, it undermines the public health policy goal of deterring smoking."
Among the findings in the report (attached):
- In 2011, New Yorkers purchased 384 million packs of cigarettes from other states, Indian reservations, duty-free shops, and military bases. If New York State tax had been collected on all of these purchases, it would have generated $1.67 billion in tax revenue. The actual tax-loss figure is probably even higher, because this estimate excludes black-market and counterfeit cigarettes, which are becoming more prevalent.
- If all cigarettes consumed in New York State were purchased in-state from tax-collecting sources, it would generate an additional 6,776 jobs and an additional $257 million in wages.
New York State's cigarette excise tax rate is $4.35 per pack, by far the highest in the nation and 31% to 63% higher than surrounding states, making cross-border purchases lucrative. Tribal stores continue to sell cigarettes to non-Indian customers tax-free in defiance of New York State law. There is a huge flow of smuggled product from Virginia and other distant, low-tax states.
"If New York insists on having the highest cigarette tax rate in the country, it has a duty to taxpayers, small businesses, and public health to aggressively prosecute the tax avoidance precipitated by such a policy, be it via the I-95 corridor, through Native American enterprises, over the Internet, or in back alleys," said Calvin. "We urge New York State to make it a top priority in 2013 to stem the tide of cigarette-tax evasion in the interest of maximizing tax revenue, employment, economic growth, and community health."
John Dunham and Associates is a leading New York City-based economic consulting firm specializing in the economics of fast moving issues. Its clients include a wide variety of businesses and organizations, including Fortune 500 companies. John Dunham is a professional economist with over 25 years of experience in both the public and private sectors, including positions with tobacco manufacturer Philip Morris USA, the Port Authority of New York and New Jersey, and the City of New York.
Headquartered in Albany, the New York Association of Convenience Stores is a private, not-for-profit trade organization representing neighborhood mini-marts and convenience stores statewide that collect all state and local taxes on the legal tobacco products they sell to adult customers.