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Audrey Silk

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Governor Cuomo Says No New Taxes in Budget but Loophole Closure Is a Tax on Smokers

Posted: 01/24/2012 5:07 pm

This past Tuesday New York State Governor Andrew Cuomo presented the state's Executive Budget for 2012-2013.

Ensuing headlines reflected the words of State Budget Director Robert Megna and of the governor who said, "This budget closes the remaining deficit with no gimmicks [and] no tricks," and "No one shots, no new fees, and no new taxes," respectively. Governor Cuomo added that there'd be "No surprises. It's not a Cracker Jack box. You're not going to find anything at the bottom of it."

The unmitigated gall. Found near the bottom of the budget briefing book is this most unwelcome (booby) prize:

Loophole Closing Actions The Executive Budget proposes two loophole closing actions related to tobacco products. These actions are expected to produce $18 million on an All Funds basis in Fiscal Year 2012-13.


• Cigar Tax. Because the cigar tax is imposed on the wholesale rather than retail price,
the current cigar tax has a potentially inequitable impact on wholesalers depending on
whether or not they are also retailers. This proposal would replace the current cigar tax
(75 percent of the wholesale price) with a new two tier tax that includes a lower
wholesale tax of 20 cents per piece while imposing in tandem with a new 50 percent tax
at the retail level. The retailer would receive a credit for the wholesale tax. This is not
anticipated to have an impact on the retail price of cigars.

• Loose Tobacco. Loose tobacco is currently taxed at a different rate than tobacco in
cigarettes. This inconsistent treatment of tobacco taxation has allowed certain retailers
to obtain an unfair advantage of lower costs by providing loose tobacco, paper, and
machines so customers can roll their own cigarettes at a much lower cost than
manufactured cigarettes. The proposal would change the tax rate on loose tobacco from
75 percent of the wholesale price to $4.53 per ounce -- the same as the per ounce rate
on cigarettes.

The very definition of "gimmick" is a concealed, usually devious aspect or feature of something, as a plan or deal.

"Loophole closing action" is an appalling use of creative speech to cover up the devious aspect of the budget which is to assert it contains no new taxes. Really? Well how about two new taxes!

The tax hike on loose tobacco goes even deeper under cover of darkness (the kind reserved for the blind) when the motive offered for its need is to put the kibosh on shops that provide the means necessary for a person to make their own cigarettes from scratch and ends up costing way less than a pre-manufactured pack of cigarettes. Except that you can probably count on one hand how many of those shops exist -- or are likely to ever exist since practically all of them are in NYC and Mayor Bloomberg has already bullied two out of business with a lawsuit that the owners could not afford to fight. The rest (all five or so of them) have already been warned and will likely suffer the same death-by-prohibitive legal fees fate.

This is the quintessential act of putting lipstick on a pig or, in this case, a piggybank that's got "SMOKER" stamped on its behind. Nearly 100 percent of local loose tobacco purchases are made by individuals buying a bag or drum from places like your corner CVS and taking it home. That's who Cuomo has in his sights with this tax hike -- ordinary members of the public, not the barely existent retailers he's using to cover his behind.

Once again smokers are treated as non-persons, relegated to the status of a passing and deviously disguised technicality in a section of the budget titled "Revenue Actions and Tax Reforms."

When the rules and considerations that apply to everyone else never seem to apply to smokers the only "no surprise" promised is when Cuomo also tries to get away with staking the other half of his position on the grounds that it's "inconsistent" to charge a different tax rate on loose tobacco than tobacco in cigarettes. Tobacco is tobacco, no?

Well then, cotton balls are cotton balls and chicken wings are chicken wings too, no? No. Calling the state sales tax law "hairsplittingly crazy," the NY Daily News (in an article about inspections of supermarkets) points out that:

Cotton balls, for example, are tax-free if they're sterilized for medical use, but taxable if they're sold for removing makeup. And heated chicken wings are taxable, while unheated wings are not.

Take a look at "Food and Food Products Sold by Food Stores and Similar Establishments." It's a bulletin put out by the New York State Department of Taxation and Finance for use as a guide. It explains the "inconsistencies" -- I'm sorry, distinctions -- in different tax rates.

Ask the deli counterman for a pound of loose sliced salami and it's exempt from sales tax. But have him slap it in a bread wrapping? Bingo! Taxed. Hot dogs wrapped in a bun? Taxed. Hot dogs in a package? Exempt. Tobacco in a paper wrapper? Taxed. Tobacco in a bag? Exempt. Oops, no, it's the same dontcha know so... Taxed.

The difference between "inconsistency" and distinction is so obviously prejudicially lopsided.

When our governor declared in his State of the State address that his budget, in deference to "putting the people first" because "we are New York," wouldn't contain any increased taxes but then raises it on cigars and loose tobacco, it seems to make it official that smokers aren't "the people." Not New Yorkers; not persons.

Openly go back on a no tax pledge on millionaires and the mainstream media and other politicians and groups with the people's interest in mind have a million questions for the governor to answer. Lie about the imposition of a tax that's in plain sight and the sound of crickets outnumber the few printed whispers of "loophole closings" and not one more word to say. It's those damn smokers, dontcha know. Nobodies. Who just happen to be the only non-millionaires contributing to the benefit of everyone.

Inconsistent treatment of tobacco taxation, my behind. More like inconsistent treatment of "the people." By everyone. The lack of questions for the governor is disgraceful.