Health Groups Create Web-Based "Tax Ticker" Documenting State Revenue Lost to Cigarette Tax Evasion
State Losing out on Crucial Tax Revenue from Native American Cigarette Sales
ALBANY, NY (11/12/2008)(readMedia)-- New York State's leading public health organizations today announced a web-based "Tax Ticker" located at www.alany.org/tobaccotaxticker, enabling citizens to track the amount of tax dollars the state loses per second by failing to collect the excise tax on Indian cigarette sales.
Based on a 2006 NYS Department of Health study, and factoring in the tax increase that took effect June 3, the groups estimate that New York will lose more than $600 million per year in revenue to untaxed reservation-based sales. The loss amounts to $19.08 per second.
The groups urged Governor Paterson to move promptly to collect taxes on cigarettes sold on Native American reservations. Legislation awaiting Governor Paterson's signature will strengthen state law by prohibiting manufacturers from shipping cigarettes to wholesalers that sell untaxed cigarettes and require wholesalers to certify, under penalty of perjury, that cigarettes are not sold in violation of the law.
"New York State is hemorrhaging crucial tax revenue to the tune of $1.6 million per day - that's almost $20 per second that could be used on programs to protect New Yorker's health," said Donald Distasio, CEO, American Cancer Society of NY & NJ. "New Yorkers will be healthier if this tax is collected since more smokers will quit and, in a time of fiscal crisis, the state will have increased capacity to fund programs that provide life-saving health services to the neediest people in our communities. The bottom line is healthy residents cost the state less money. Healthier New Yorkers and less spending - isn't that what we are trying to achieve?"
"New York State can no longer afford to look the other way when it comes to implementing and enforcing the law to collect cigarette taxes," said Dr. Edward Philbin, spokesman for the American Heart Association and Chief of Cardiology at Albany Medical Center. "In my daily work, I see the devastating effect of smoking on New Yorkers. By closing this loophole, the Governor has a chance to improve the physical and fiscal health of New York."
"Higher cigarette prices discourage smoking," said Michael Seilback, Vice President, Public Policy & Communications for the American Lung Association of New York. "If all the smokers who are evading taxes by buying cigarettes that originate on Native American reservations had to pay full price, including tax, as many as 150,000 would quit and thousands of kids would never begin."
The legislation, S.8146b/A.11258a, makes the enforcement of the tax law easier for state government, without violating Indian sovereignty. This legislation is constitutionally permitted, will result in fewer smokers, and will dramatically increase much needed revenue to our state. In 1994, the U.S. Supreme Court ruled that the regulatory system to pre-collect taxes on sales to non-Native Americans was entirely constitutional.
Smoking is the number one preventable cause of death and the collection of cigarette tax has an enormous health benefit for the people of New York. The state Legislature increased the tax on cigarettes in June to increase state revenue, but also because studies showed that doing so would reduce the number of people who smoke and lower health care costs from cigarette-caused illnesses.
In 2006, the New York State Department of Health (DOH) published a study of tax evasion based on surveying smokers and asking them about their purchasing habits. The DOH study estimated lost revenue to reservation sales (not including Internet) at $329 million in 2004. On June 3, 2008, the tax rate increased to $2.75, an increase of 83%. Increasing $329 million by 83% nets $602 million in revenue lost to reservation sales every year. Dividing $602 million by 365 days provides for $1,649,315.08 in lost revenue every day. There are 525,600 minutes in a year, which divided into $602 million, provides for $1,145.36 in lost revenue per minute to reservation sales. This translates into $19.08 per second.