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Albany boneheads smoke $2B in cigarette taxes; a $450 million loss and growing; a more than stupid effort that was doomed to fail and we knew it. Lawmakers shouve have too!

March 30, 2011

Albany boneheads smoke $2B in cigarette taxes

Last Updated:
1:10 AM, March 29, 2011

Last summer, some genius in Albany had the bright idea to raise the tax on cigarettes. The state wasn’t trying to make cigarettes so costly that people would stop smoking and save their health.

Albany’s motives weren’t that high-minded.

No, the state wanted — make that “needed” — more revenue. So the tax went up by $1.50 a pack.

At around that same time New York State also halted virtually all enforcement against people who were smuggling cigarettes in from other lower-tax states.

This enforcement shutdown was caused by a petty squabble that I reported at the time.

Cigarette investigators, including a number of confidential informants who were risking their own safety, hadn’t dotted all the i’s during their sting operations and some Albany bureaucrats were having a hissy fit. (Important criminal cases are also said to be in jeopardy because of these bureaucrats’ snit, but that story will have to wait for another day.) What was the end result of the higher cigarette tax? Instead of gaining revenue from the tax increase, the state will lose about $450 million in revenue.

Smokers did what smart consumers always do; they made purchases in nearby states with lower taxes and on Indian reservations, where there is no cigarette tax.

Retailers located in New York counties that border other states have seen a 31 percent decrease in the number of packs they are selling, according to state figures.

But the state’s loss doesn’t end with that $450 million.

Nobody has a good handle on how many packs of cigarettes are smuggled into New York and sold with counterfeit tax stamps that make them look legit. The best guess, though, is around 250 million packs each year.

The state would lose $1.54 billion in tax revenue on those packs.

So, combined, the effect of the tax increase plus the cutback in enforcement is costing Albany tax coffers a total of around $2 billion a year.

Back in January I vowed to find $1 billion in tax revenue that New York State wasn’t collecting.

The idea was simple, but not easy: if you can increase the amount of revenue coming into the state’s coffers, then you would not have to cut as many services, lay off as many employees, increase taxes as much or use whatever diabolical remedy the politicians could come up with.

Makes sense, right?

Well, not in Albany, where right now your elected officials are trying to cut $10 billion in services and spending.

It isn’t that cuts shouldn’t be made — there is waste. Sadly, this is the simplistic and politically opportune way of doing things these days. But Albany should also make a reasonable effort to collect taxes that are due.


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