New York - tax increase on tobacco must pass or else state faces extreme budget crisis..

June 20, 2010 - Cigarette taxes in New York would jump by $1.60 [$2.75+1.60=$4.35] a pack under a tentative deal reached between Gov. David A. Paterson and legislative leaders, which would give New York the nation’s highest state cigarette taxes.

The proposal, which officials said Mr. Paterson would include in an emergency budget bill due for a vote on Monday, June 21st would also raise wholesale taxes on other tobacco products like chewing tobacco, bringing the tax on those products closer in line with those of cigarettes.

In New York City, which levies steep taxes of its own on tobacco products, a pack of cigarettes would come with a tax of $5.85, making it the nation’s first city to break $5, anti-smoking advocates said. That would bring the overall cost of a pack of premium cigarettes above $10 in many stores in the city.

The legislation will also include a plan to begin collecting taxes on cigarettes sold off the reservation by Indian tribes in New York, an issue that has provoked confrontations between State Police officers and protesting tribe members in years past. Mr. Megna. the state budget director, said the state, in an effort to avoid a confrontation, would tax wholesalers who sold cigarettes to Native American tribes. Tribes would be allotted a certain amount tax-free for their residents. “We would hope that there would not be any violence,” Mr. Megna said. “We’re trying to minimize any violent activity and make it clear that their product for their consumption is tax-free. The only thing we’re trying to tax is New York State residents’ consumption of taxable products.”

New York State - state democrats insist governor tax cigarettes sold on Indian reservations.., February 2, 2010;
NY State Governor Patterson - part of budget - collect Indian cigarette taxes.. - January 20, 2009;
NY Proposed Budget - calls for 17 cent increase in cigar tax.. - December 19, 2008.

The proposal would generate $440 million in revenue this year, helping close a state budget gap estimated at over $9 billion. But it is unclear whether there are enough votes to approve the plan in the State Senate, where Republicans have threatened to vote against any emergency budget bill that includes tax increases and some Democrats oppose efforts to collect taxes on cigarettes sold by the tribes.

Should the measure fail, the government would face an unprecedented shutdown. Should it pass, lawmakers must still meet to find ways to close the entire budget gap. (NY governor sets budget deadline, rejects borrowing)

Reference: New York Reaches Deal to Raise Cigarette Tax by NICHOLAS CONFESSORE and DANNY HAKIM, The New York Times, 6/18/2010.