NEW YORK IS BEGGING FOR A BLACK-MARKET CIGAR INDUSTRY
By James Kommer, New York Post, February 27, 2018
In an attempt to close New York state’s $4.4 billion budget deficit, Gov. Cuomo proposed a package of $1 billion in tax hikes and fee increases as part of his 2018-2019 Executive Budget unveiled in January.
Among the list of “revenue raisers” is a proposal to change the formula for the way state excise taxes on cigars are calculated. The new rules would make the cigar taxes based on invoice costs instead of manufacturing costs, beginning on Sept. 1. If passed, this would raise state cigar taxes from the industry standard of 28.5 percent to 75 percent.
What would this mean for the consumer? A cigar currently on the shelf for $8 would increase to nearly $11 due to the tax hike.
Cuomo’s proposal comes just five months after Mayor de Blasio signed a tax hike into law prohibiting cigars from being sold for less than $8 per stick and added a 10 percent tax. The impact? What were once less expensive cigars selling for $5 now cost $8. And a cigar with a suggested retail price of $9.50 now costs nearly $14 before sales tax.
Should Cuomo’s proposal become law, it would likely bring about the closure of some small businesses and cost jobs. That’s why the New York Association of Convenience Stores is opposing the tax hike. According to its president, Jim Calvin, the hike “would backfire by driving customers of licensed, tax-collecting convenience stores to tax-free cigar outlets in search of cheaper prices, costing us business.”
State tax hikes on tobacco products in the past have shown one thing: raising taxes actually decreases state revenue. State collections from tobacco sales dropped from $1.5 billion to $1.2 billion over the last five years as tobacco taxes have jumped and smokers, especially cigarette smokers, have increasingly purchased from out-of-state shops.
Despite this fact, Cuomo’s budget estimates the latest cigar tax hike would generate an additional $23 million in revenue annually, showing that the proposal is nothing more than part of a desperate attempt at plugging the state’s deficit that has grown on his watch.
New York’s high taxes and limited enforcement have driven consumers to purchase their cigars and tobacco products from tax-free Native American, Internet and border-state retailers. And yet, according to the Campaign for Tobacco-Free Kids, despite New York’s highest-in-the-nation cigarette taxes, it still has the ninth-highest adult smoking rate.
Simply put, New York can’t afford to enforce the laws already on the books and its anti-smoking tax policies are costing the state (and city) billions of dollars in lost revenue.
Cuomo’s new cigar tax hike would further harm small businesses and put more people out of work.
James Kommer is owner of James & Sons Tobacconists in Saratoga Springs.