Legislature OKs hefty tax increases on tobacco

ALBANY - Lawmakers Monday approved hefty increases in state taxes on cigarettes and other tobacco products that were put into the emergency spending bills required to keep government running.

Gov. David A. Paterson's push to raise the cigarette tax by $1.60 per pack to $4.35, the nation's highest, will go into effect July 1. The increase passed the Assembly, 77-64, and the Senate, 32-29.

Senators also adopted two budget bills Monday night for spending on roads, prisons, economic development and open space purchases - which were approved last Friday by Assembly members.

In addition to increasing the cost of cigarettes, Paterson successfully sought higher levies on chewing tobacco, cigars and similar products, going from 46 percent of the wholesale price to 75 percent, starting Aug. 1. He also is again attempting to collect taxes on Indian cigarette sales to non-Indians, effective Sept. 1.

The tax hikes sparked debate in both chambers.

Assemb. Andrew Raia (R-Huntington), citing an informal survey he conducted of cigarette retailers, said, "These tax increases will drive half of them out of business in the next year." He added that smokers would avoid the levy by making purchases on the Internet and at Indian reservations.

Assemb. Harvey Weisenberg (D-Long Beach) responded, "I don't want people to go out of business . . . but if we can deter people from smoking and the cancer it causes, we are doing a good thing."

Still, lawmakers criticized Paterson's use of the emergency bills to force adoption of budget components. They said they only backed the tax increases because to do otherwise would shut down state government for the first time in modern history.

"This is a poor way to develop budgets. . . . I oppose the level of increase in the cigarette tax," said Sen. Brian X. Foley (D-Blue Point).

In both houses, lawmakers questioned whether the latest attempt to collect taxes on Indian cigarette sales would be effective. Some predicted lawsuits, while others worried about violations of Indian treaties.

"I don't believe we should be taxing Native Americans," said Sen. Eric Adams (D-Brooklyn). "We are on their land."

Meanwhile, the Senate giving final passage to both sets of bills means 70 percent of the $136-billion budget has been completed. However, thorny issues such as school aid and property tax relief still must be resolved.

Asked about budget negotiations, Assembly Speaker Sheldon Silver (D-Manhattan) said they were unlikely to wrap up Tuesday, as he had predicted. "It may be a little slower than I anticipated last week, but I think they are going well," he said.

The budget bills, valued at $18.5 billion, sparked criticism from Republican senators over the closing of two prisons upstate and replacing the Empire Zones business development program with the less generous Excelsior Jobs Program.

BUILDING A STATE BUDGET

State leaders are rushing to meet a June 28 deadline to complete the 2010-11 budget, which is 83 days late. Here's some of what has been accomplished and remains to be done:

CLOSE $9.2-BILLION DEFICIT *

TOTAL SO FAR: $4.68 billion including:

About $2 billion in administrative actions by Gov. David A. Paterson including $250 million in state workforce savings

$775 million in Medicaid

$348 million to public protection and state government operations

$325 million to local governments

$195 million to Environmental Protection Fund and other environment and energy programs

$175.4 million to welfare and human services

$149 million to mental health programs

$140 million to economic development and regulation

$35 million to transportation

SPEND ABOUT $136 BILLION

TOTAL SO FAR: about $95 billion including:

$56 billion for Medicaid

$18.5 billion for economic development, transportation, public safety and state government operations

$134 million for the Environmental Protection Fund

$16 million for state parks, campgrounds and historic sites

NEW TAXES, FEES AND OTHER REVENUE

TOTAL SO FAR: $609.5 million including:

$290 million from higher taxes on cigarettes and other tobacco products

$155 million in new legal fees and proceeds from winning lawsuits

$150 million from enforcement of sales-tax collection on Indian cigarette sales to non-Indians

$7.5 million from extending through 2013 the $2.50-per tire fee to dispose of used tires

$4 million in fees for electronic and hazardous waste generation

$3 million in bond insurance charge on NYC Housing Development Corp. borrowing ruled out by Paterson

UNRESOLVED

School aid, higher education, pension contributions, STAR property tax relief, tax increases and other revenue actions

* - includes spending cuts and tax increases

Sources: NYS Budget Division, Legislative Conferences

Compiled by James T. Madore