New York's Forgotten Billion-Dollar Stimulus

ALBANY, NY (03/23/2009)(readMedia)-- Supporters of fair tax collection today released an economic study confirming for the first time that the hemorrhage of New York State revenue from untaxed sales of cigarettes by Native American tribes has reached $1 Billion a year.

The analysis by Brian O'Connor Ph.D. shows that if the Paterson administration were enforcing the existing state law requiring collection of cigarette taxes on tribal sales to non-Indian customers, it would yield revenue "in the proximity of $1 billion."

This month marks the third anniversary of that law. Yet, to the detriment of small businesses, state and local governments, and anti-smoking programs, it has never been enforced by Governors Pataki, Spitzer or Paterson, allowing cigarette tax evasion to reach epidemic proportions.

Calling it "the forgotten billion-dollar stimulus," concerned businesses and public health advocates held a press conference in Albany today to urge Governor Paterson and legislative leaders not to forego this major source of new revenue as they assemble the next state budget.

"With New Yorkers being asked to absorb billions in spending cuts, new taxes, and fee increases, it would be fiscally irresponsible to adopt a budget without tapping into this recurring revenue stream," said NYACS President James Calvin.

"Based on calculations by the Governor's own Health Department, at least 100,000 smokers would quit if the tax were collected on all cigarette sales," said Russ Sciandra, Director of the Center for a Tobacco Free New York. "The public health benefit in human and fiscal terms is almost too big to calculate."

"In this dire fiscal emergency, the failure of the State to aggressively collect these taxes is no longer acceptable, if it ever was," said Richard Lipsky, spokesman for the New York City's Neighborhood Retail Alliance.

Dr. O'Connor's previous analysis in February 2008 pegged the tax loss at $600 million. Since then, the state excise tax on cigarettes almost doubled, from $1.50 a pack to $2.75, on June 3, 2008, triggering a new wave of tax evasion. Consequently, the portion of cigarette sales in New York on which no tax is paid (tribal, Internet, mail order and black market combined) now exceeds 50% for the first time, the report says.