Why This is Not the Time to Increase New York State’s Cigarette Tax
ALBANY, NY (03/05/2008)(readMedia)-- Anti-smoking groups are urging the State of New York to increase the $1.50-per-pack state excise tax on cigarettes to $3.00, and cite a public opinion survey indicating most New York's favor doing so. Here’s why it’s a bad idea. You may attribute any or all of these observations to James Calvin, President, New York Association of Convenience Stores.
Top 7 Reasons This is Not the Time to Increase the Cigarette Tax
1. New York is a cigarette tax a sieve. The state collects just under $1 billion in cigarette taxes annually, but loses another $1 billion due to “tax free” sales by Internet vendors, Native American tribal stores, and black market entrepreneurs. Cigarette tax evasion is an epidemic. Raising the tax rate would have all the effect of pouring water into a leaky bucket.
2. The biggest slice of the cigarette tax evasion pie is sales by Native American stores to non-Native American New Yorkers. By law, Governor Spitzer is supposed to be collecting the excise tax on these purchases, but refuses to do so. This enforcement would generate at least $500 million in new revenue in 2008-09.
3. State Department of Health research shows that at least half of New York smokers buy cigarettes from these tax-free outlets to avoid the tax-inflated price. If the existing state excise tax of $1.50 a pack causes 50% of the smokers to avoid the tax, and you doubled the excise tax, then what percentage of smokers would buy from untaxed sources?
4. The more you drive smokers to these tax-free outlets, the more cigarettes will be sold without any monitoring whatsoever by state and local health departments to detect and penalize sales of cigarettes to children. And the more cigarettes will be sold beyond the reach of other state and local regulations, such as fire safety standards.
5. Increasing the cigarette tax before addressing the tax evasion epidemic would be like trying to warm your house in mid-January by turning up the thermostat while all your windows are open. It would be a lot more efficient and effective to just close the windows.
6. It’s a false assumption that a higher tax rate would generate more revenue. Partly due to consumption declines, but mostly due to tax evasion, the state collects less cigarette excise tax today at $1.50 per pack than it did in 2001 when the tax rate was 39 cents a pack lower.
7. Given the realities of tax evasion, increasing the tax rate would be utterly self-defeating.
Top 5 Questions We Would Have Asked on the Cigarette Tax Survey
1. Since most of you don’t parachute from airplanes on a regular basis, would you mind if we increased the state tax on skydiving?
2. Are you aware that your household is paying $143 in additional property taxes and sales taxes every year in order to help make up for the $1 billion in revenue the state and local governments lose every year to cigarette tax evasion? Would you be willing to pay even more if the cigarette tax gets doubled, causing twice as much tax evasion?
3. Is it OK with you if we chase more customers to tobacco outlets where there is no monitoring by state and local health departments to detect and penalize sales of cigarettes to children?
4. As long as tobacco remains a legal product, would you rather have it sold at stores that obtain a license from the state, collect and remit all state and local taxes, abide by the state ban on self-serve displays, ID customers who appear 24 or younger, comply with the minimum pricing law, and sell only cigarettes that meet the state fire safety standard – or places that thumbs its nose at all these regulations?
5. Do you think it makes sense for anti-smoking groups to advocate higher taxes on cigarettes as a way to reduce youth smoking, while at the same time opposing a new law that would deter youth smoking by subjecting teenagers to civil penalties if they were caught using or possessing tobacco products?
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