Tobacco tax boost tied to Indian issue
ALBANY — A legislative push would deny Gov. David A. Paterson his $1-per-pack cigarette tax increase until the state begins collecting taxes on tobacco products sold on American Indian reservations.
The governor included the cigarette tax increase in his proposed budget. But when the governor’s call to start collecting the taxes on such sales to non-Indians would kick in remains unclear, although it likely would be months after the proposed tobacco tax increase takes effect June 2.
“We should collect before we tax,” State Sen. Carl Kruger, chairman of the Senate Finance Committee, said Tuesday at a legislative hearing looking into ways to end the tax-free sales.
“Everyday that goes by we are not doing the right thing for the people of New York,” said Kruger, a Brooklyn Democrat who called the long-standing tax-free sales a “diabolical scheme” that has denied the state billions of dollars in tax revenue.
Lawmakers are growing frustrated with the Paterson tax collection plan because they have not been able to obtain details on when or how the new effort would work. Paterson officials said last week that the Department of Taxation and Finance would issue rules within a matter of days to collect the tax.
“Unfortunately, attempts to clarify these questions with the relevant executive branch authorities have been unsuccessful to date,” said Sen. Craig D. Johnson, the Port Washington Democrat who presided at Tuesday’s hearing.
The Paterson administration did not respond to questions about the tax collection effort.
Earlier in the day, the Senate’s top Democrat distanced himself from the cigarette tax increase.
“No new fees, no new taxes,” Senate Democratic Conference Leader John L. Sampson of Brooklyn said of the plan to raise the excise tax to $3.75 per pack.
Representatives of the Seneca Nation of Indians were in the Capitol on Tuesday, also seeking details of the governor’s plan.
“It’s unclear,” J. C. Seneca, a Seneca councilor, said of the timetable or structure for the tax collection after a meeting with Paterson’s top lawyers.
The Senate committee released a spread sheet it received from the Paterson administration showing that Indian tribes with casinos owe the state $55 million in back payments for security and background work performed by the State Police at the gambling halls. Of this total, the Senecas owe $40 million for State Police work at the Seneca Niagara and Seneca Allegany casinos.
“We have to sit down and figure out the charges,” Seneca said.
Tuesday’s Senate hearing, a continuation of a session that began in October in New York City, included a fiery defense of the Seneca position by the nation’s representatives.
Convenience store operators, meanwhile, turned out to urge lawmakers not to impose the new $1 cigarette tax without resolving the collection dispute. They said doing otherwise would encourage more illegal Indian and bootleg sales.
