Before you cut the budget, collect the tax. It’s about the law.
New York faces a catastrophic budget crisis. It is a crisis that may well lead to deep budget cuts affecting essential government services like education and transportation. Some in Albany are even talking about higher taxes.
But something is seriously wrong with this picture. New York stands virtually alone among all other states in its practice of not collecting any excise taxes on cigarettes sold through Native American reservations to non-tribal members. This non-enforcement policy has never made sense. Today – in the midst of a budget crisis in which teachers and police officers may lose jobs – this policy is simply absurd.
New York’s failure to collect excise taxes on cigarettes sold through tribal retailers has created an enormous loophole in the tax collection system in New York. That loophole has led to a huge revenue loss for the State – and a huge burden for New Yorkers.
Recent studies peg the loss of tax revenue at hundreds of millions of dollars each year – maybe more. With the State’s budget in deep crisis and New Yorkers being asked to make big sacrifices, these funds could be used to prevent more tax increases, or to support essential public services, such as hospitals, schools, transportation – important to all residents of New York.
The solution is simple.
Before you cut jobs, before you cut essential services, and before you raise any tax, close the loophole and collect existing taxes.
Here are some facts that emerged from a recent New York Senate Committee hearing on the issue of uncollected cigarette excise taxes:
- The State allows about 180 reservation outlets to purchase and resell into New York commerce unlimited supplies of untaxed cigarettes, rather than exempting state excise taxes for tribal member only.
- These outlets now sell one-third of all cigarettes in New York – none of it taxed. That's over 240 million packs per year – or about the same volume that moves through the entire State of New Jersey.
- The retailers that do pay taxes – some 22,000 in all – have seen their business shrink, at a time when they and their employees are facing an already brutal economy.
- The abundant supply of untaxed and unstamped cigarettes is fueling illegal cigarette smuggling by criminal organizations, some with ties to terrorism, and some who sell untaxed cigarettes on street corners in New York City.
- If the State begins collecting these taxes, the New York will recover hundreds of millions of dollars in revenue, business will shift back to retailers and wholesalers who pay their taxes and important state services will no longer be threatened with severe budget cuts.
No matter how you look at it, the State should collect these taxes. The New York Legislature has spoken. The federal courts have affirmed the State’s power. In fairness to all New Yorkers the time to act is now.
Before Albany’s leaders ask us to make one more sacrifice, they should do the right thing, and collect the tax.
Because this isn’t about tribal sovereignty. It’s about the law. Plain and simple.