The Epic Failure Of New York’s Cigarette Taxes



The state of New York taxes cigarettes more than just about every other state in the republic. For some reason, it’s not working out so well. In fact, it’s an epic failure. But the New York Association of Convenience Stores is pushing for more policing of the citizens rather than a reduction in the taxes which would make them more able to compete with the Indian reservations and other suppliers of tax free cigarettes.

Chronic cigarette-tax evasion continues to cost New York State at least $1.7 billion a year in tax revenue and 6,700 jobs, according to a new report from the New York Association of Convenience Stores (NYACS).

Commissioned by NYACS, the economic study by John Dunham & Associates determined that in 2011, one of every two packs of cigarettes consumed in New York State escapes collection of New York State taxes. “This is further proof that New York, which has the highest cigarette excise tax in the nation, continues to suffer the corrosive economic and fiscal effects of the worst cigarette tax evasion in the nation,” said NYACS President James Calvin in a press release.

“This epidemic costs our state and local governments hundreds of millions of dollars in tax revenue annually, deprives tax-collecting retailers of legitimate business, and siphons away private-sector jobs,” he said. “Moreover, it undermines the public health policy goal of deterring smoking.”

The report found that in 2011, New Yorkers purchased 384 million packs of cigarettes from other states, Indian reservations, duty-free shops, and military bases. If New York State tax had been collected on all of these purchases, it would have generated $1.67 billion in tax revenue. The actual tax-loss figure is probably even higher, because this estimate excludes black-market and counterfeit cigarettes, which are becoming more prevalent.

This is laughable. The convenience stores don’t want to deter smoking. They want the smokers buying cigarettes at their stores, and they want the state to crack down on their competition.

“If New York insists on having the highest cigarette tax rate in the country, it has a duty to taxpayers, small businesses and public health to aggressively prosecute the tax avoidance precipitated by such a policy, be it via the I-95 corridor, through Native American enterprises, over the Internet or in back alleys,” said Calvin. “We urge New York State to make it a top priority in 2013 to stem the tide of cigarette-tax evasion in the interest of maximizing tax revenue, employment, economic growth, and community health.”

So they don’t like the tax that much, but, by golly, they’ll go along with it as long as the police state protects their profit margins.

New York isn’t the only state that’s seen massive failure with sin tax schemes. In Cook County, Illinois they’re devoting resources to police raids and crackdowns on cigarette tax evaders, and they’re hiring more government workers to carry out those raids. No doubt those new government employees will be union members with high salaries and expensive benefit packages that the cigarette tax evaders couldn’t afford in the first place.