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Cigarette lobby says NY overestimates revenue from tax hike (LoHud.com)
04/06/2010
Altria, the parent company for Philip Morris USA, released an analysis today disputing the state Division of the Budget’s projection that increasing the cigarette tax by $1—from $2.75 to $3.75 per pack—would raise $210 million in the 2010-11 fiscal year. The Altria report said the net state tax revenues would be only $90.1 million higher with the tax hike.
Gov. David Paterson proposed the tax hike as one way to help New York resolve its budget deficit. The Assembly’s budget plan includes it, but the Senate budget resolution does not. The Legislature, which has been on break, will return to the Capitol tomorrow. The 2010-11 fiscal year began last Thursday without any budget agreement, and negotiations continue.
The state stands by its estimate, which assumes a 14 percent decline in smoking , Paterson budget spokesman Matt Anderson said. Besides raising more money, it would make New Yorkers healthier, he said.
“We believe it is a fair and accurate assessment of the revenues that will be produced,” he said.
A number of states have underestimated how much revenue they would lose after increasing cigarette taxes in recent years, the Altria report said.
Altria’s analysis said the higher tax, which would raise the price of a pack of cigarettes from $7.61 per pack to at least $8.79, could lead to a 20 percent drop in taxable packs sold.
“New York, like other states, must contend with cross-border sales (adults going to other states to buy their products) and sales from certain sources like Native-American reservations, duty-free stores, and even sales from over the internet,” the report said. “As such, tax-paid sales are generally much more reactive to state tax increases than to federal tax hikes.”
New York City stands to lose $29.4 million due to reduced taxable cigarette sales that are a result of the state excise tax hike, the analysis found. About $12.8 million of that currently goes to the state to pay for tobacco-control programs. The state would lose about $11.7 million in sales tax revenues because of the lower volume of cigarette sales, the analysis said.
Gov. David Paterson proposed the tax hike as one way to help New York resolve its budget deficit. The Assembly’s budget plan includes it, but the Senate budget resolution does not. The Legislature, which has been on break, will return to the Capitol tomorrow. The 2010-11 fiscal year began last Thursday without any budget agreement, and negotiations continue.
The state stands by its estimate, which assumes a 14 percent decline in smoking , Paterson budget spokesman Matt Anderson said. Besides raising more money, it would make New Yorkers healthier, he said.
“We believe it is a fair and accurate assessment of the revenues that will be produced,” he said.
A number of states have underestimated how much revenue they would lose after increasing cigarette taxes in recent years, the Altria report said.
Altria’s analysis said the higher tax, which would raise the price of a pack of cigarettes from $7.61 per pack to at least $8.79, could lead to a 20 percent drop in taxable packs sold.
“New York, like other states, must contend with cross-border sales (adults going to other states to buy their products) and sales from certain sources like Native-American reservations, duty-free stores, and even sales from over the internet,” the report said. “As such, tax-paid sales are generally much more reactive to state tax increases than to federal tax hikes.”
New York City stands to lose $29.4 million due to reduced taxable cigarette sales that are a result of the state excise tax hike, the analysis found. About $12.8 million of that currently goes to the state to pay for tobacco-control programs. The state would lose about $11.7 million in sales tax revenues because of the lower volume of cigarette sales, the analysis said.
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