Lower Hudson Journal News: Budget plan adds tax on cigarettes

(January 20, 2010)

LoHudMasthead


January 20, 2010

Joseph Spector
Albany Bureau

ALBANY — Smokers would have to pay $1 more in taxes on a pack of cigarettes, soda drinkers would have to pay a penny more per ounce on a can of soda, and gamblers would get more time to play Quick Draw and video-lottery terminals under Gov. David Paterson's budget plan that was unveiled Tuesday.

And watch out on state highways: The governor's proposal would install cameras to nab speeders at 40 work zones and 10 other locations.

With the state facing a $7.4 billion deficit in fiscal 2010-11, Paterson is proposing $1 billion in new taxes and fees. The proposal is much lower than the $8 billion in new taxes and fees in the current year's budget.

But if approved, the new taxes would still hit many New Yorkers. Some lawmakers and groups were quick to assail the proposed charges.

"New York should be reducing its tax burden and growing its economy, not making our worst-in-the-nation tax burden even more onerous," said Mike Elmendorf, state director of National Federation of Independent Business.

The cigarette tax would increase the current $2.75 per-pack tax by $1, giving New York the highest tax on cigarettes in the country. The state estimates it would bring in $218 million a year.

Advocates said the tax — and the one on sugary drinks — would make the state healthier.

"Today's budget announcement shows that New York can once again become the national public health leader in tobacco control," said Scott Santarella, president of the American Lung Association in New York.

James Calvin, president of the state Association of Convenience Stores, said the Democratic governor should not increase cigarette taxes until the state begins collecting the tax on Native American reservations — something Paterson and previous governors have been unable to do.

Paterson wants to seek regulations to stop wholesalers from selling unstamped cigarettes on Native American reservations and try to collect the tax.

But the plan will take months to formulate.

The excise tax on sugary drinks would mean about a one penny per ounce tax on sodas and other sugary drinks. So the $1 cost of a 16-oz. bottle of soda would increase by about 16 cents, budget officials said. Dietary aids, infant formula and milk would be exempt.

The proposal, which fizzled last year, would bring in about $465 million a year for the state. PepsiCo Inc., based in Purchase, and other bottlers have fought it.

In a statement, Kevin Flood, an executive with Coca-Cola Enterprises Inc. in New York, said the company estimates the tax would increase the price of soft drinks by 50 percent or more.

"A tax of this magnitude will result in major job losses in the beverage industry. It will not reduce obesity. It is not intelligent public policy," Flood said.

Paterson proposed a severance tax on some natural-gas producers. A 3 percent tax would be imposed for producers in the Marcellus and Utica Shale formation in the Southern Tier and in central New York that use horizontal wells.

The Independent Oil & Gas Association opposes the tax. Brad Gill, the group's executive director, said despite the state's fiscal woes, "let's not drive out an industry that can help upstate New York get through this time of hardship."

Environmentalists were critical of the budget because Paterson would cut $79 million from an environmental fund and impose a moratorium on open-space land acquisition.

The Adirondack Council called it a "declaration of war on New York's environment."

The governor wants to eliminate many restrictions on the hours and locations for the Quick Draw lottery game. Racetracks with video-lottery terminals would be able to expand hours. Assembly Racing and Wagering Committee Chairman Gary Pretlow, D-Mount Vernon, said he didn't think the proposals would pass the Legislature.

Paterson again wants to let grocery stores sell wine, a plan beaten back by liquor stores. Paterson would let liquor stores sell additional products and let them own more stores as a compromise.

But Jeff Saunders, founder of the Last Store on Main Street coalition, said the proposal could lead to store closures and job losses.

The budget proposal included a fee ranging from $45 to $540 per child per quarter for early intervention services provided by the state, based on income.

Filing fees at courts would also increase.

Paterson would legalize mixed-martial arts competitions in New York, which could bring in about $2 million a year in revenue.

Additional Facts

Here's a look at some of the new taxes and fees proposed by Gov. David Paterson in his 2010-11 budget:

• Allowing the sale of wine in grocery stores ($93 million in state revenue)
• Legalizing mixed martial arts ($2.1 million)
• Eliminating Quick Draw restrictions, making more establishments eligible to offer the lottery game ($33 million)
• Extending the hours of operation for video lottery terminals ($45 million)
• Deploying 50 speed enforcement cameras - 40 in work zones - at locations to be determined ($32.9 million)
• Improving audit and compliance with state-tax collection ($221 million)
• Increasing health-care assessment and surcharge rates, including an increase in hospital assessments from 0.35 to 0.75; an increase in home-care assessments from 0.35 to 0.7 percent; and an increase in nursing-home assessments, from 6 to 7 percent.
• Closing a loophole that allowed residents of other states to receive income for past services without paying New York taxes.
• Establishing a parental fee, ranging from $45 to $540 per child per quarter, for state early-intervention program services.
• Raising some civil-court filing fees, including an increase from $165 to $215 for the Supreme Court and from $45 to $60 for City or District Courts. Motion fees for both the Supreme and Appellate Courts would increase to $120 from $45.