New York Has Highest Cigarette Taxes in Country

New York now has the highest cigarette tax in the country after Gov. Paterson signed off on a $1.60 increase, bringing the total tax on a pack of cigarettes to $4.35. That means New York smokers will be paying around $10 a pack (more if they are in New York City which has its own $1.50 tax) and nearly half of that will be because of taxes. Putting aside the governor’s maternal concern for the health of New Yorkers, his state has a nearly $9 billion budget shortfall and will now rely on tobacco addicts more for a solvent government. The increase is supposed to raise $440 million in revenue. Also raising revenue are tax increases for snuff (96 cents per ounce to $2 per ounce) and wholesale cigars (46% to 75%).

New York will also try again to collect tax revenue from American Indian reservations—as much as $150 million. In 1997 a similar attempt resulted in tribe members occupying highway overpasses in protest. Two state troopers were injured.

While sound tax policy calls for broad bases and low rates—if you are going to tax cigarettes you ought to apply the tax equitably—there are good aspects in having a cigarette tax free zone in New York. The reservation provides a release valve for demand for cheap cigarettes which otherwise would be supplied by the black-market. Don’t get me wrong, organized crime still exists in New York. Just this year we wrote about a smuggler who hired a hit man to murder a couple he suspected of stealing his bootleg cigarettes meant for New York. But having cheap cigarettes a short drive away decreases the opportunity available to gangsters. Smoking is unhealthy. Mobsters are really unhealthy.

More on tobacco taxes here.