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New York Bagel Tax Has Residents Enraged

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Back in July of this year, the New York State Senate passed a budget bill that included a "$1.60 hike of the states tax on cigarettes." The move sent prices for cigarettes in New York City up to about $11 a pack, immediately creating an economic hardship for all of the Alex Balks in the region and making it necessary to present a credit history and proof of employment if you wanted to cadge a cigarette on the street. What was the overall benefit to the state's coffers? Not a whole lot, actually! Per Gothamist:

The go-to plan for cash-strapped states--an increase in the tax on cigarettes--has some holes in it. In July, the New York State cigarette tax was increased to $4.35 a pack, which becomes $5.85 when combined with the city's own levy. However, the Post reports that revenue from cigarette sales was only $125 million last month, compared to $119 million from the same month a year before--hardly equivalent to the 58% increase in tax, and barely helpful to the $9.2 billion state budget deficit.

Convenience store owners report that cigarette sales have fallen anywhere from 25-35% since the hike, and New York State only sold 28.7 million cigarette tax stamps this July, compared to 43.1 million in July of 2009.

Of course, there's probably an unrecognized savings here to health care costs if people actually quit smoking. But if there are other alternatives...

Governor Paterson seems to have underestimated the proximity of tax-free reservations in Western New York and Long Island as well as low-tax states such as Pennsylvania and Vermont--where compared to NY, they practically give away cancer sticks for free. Cigarette revenue has increased up to 45% in those areas.

Well, hopefully, there won't be any alternate tax plans that pointlessly enrage New Yorkers. Oh, hey, what's this from today's Wall Street Journal?

State tax officials, under orders from cash-strapped Albany to ramp up their audit and compliance efforts, have begun to enforce one of the more obscure distinctions within the state's sales tax law.

In New York, the sale of whole bagels isn't subject to sales tax. But the tax does apply to "sliced or prepared bagels (with cream cheese or other toppings)," according to the state Department of Taxation and Finance. And if the bagel is eaten in the store, even if it's never been touched by a knife, it's also taxed.

Oh, my. If my recollection serves me correctly, bagels tend to be very important to New Yorkers. According to Kenneth Greene, the owner of some thirty-odd Bruegger's Bagels franchises across the state who found himself in the crosshairs of state enforcement, his customers didn't take too kindly to the news:

Mr. Greene says the extra charge, about eight cents a bagel, depending on the local rate, filled his customers with boiling rage. "They felt we were nickel-and-diming them. They thought we were charging them to slice a bagel," he said.

Here in DC, the city has imposed a five cent tax on plastic bags proffered to customers by restaurants and shops. The early numbers indicate that it wasn't a major revenue generator, but it seems to have a significant net-positive social impact: as Derek Thompson at the Atlantic pointed out, "The number of bags handed out by supermarkets and other establishments plummeted 85%, from 22 million to 3 million."

But while the bag tax helps to reduce litter and limit environmental damage, I'm at a loss to discern what societal problem is alleviated by an induced reduction of slicing bagels in half. One effect it could have of course, is that it might drive many progressive New Yorkers into the arms of Grover Norquist (where, interestingly enough, they'll find Park51 supporters and gay rights proponents awaiting their arrival).

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