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Smokers, tobacco retailers face soaring charges

ALBANY - The fees and taxes paid in by cigarette smokers and retailers - for decades a "cash cow" for the state - are now being milked for more revenue to help balance a state budget in distress.

With a changing cultural perception of smoking and a $2.1 billion dollar budget deficit, New York is looking to make the tax load on smokers and tobacco retailers even heavier.

As part of the 2009-2010 state budget, the yearly retail-licensing fee was set to be increased from $100 to a tiered system with a minimum fee of $1,000 for the smallest chains.

The licensing fee payments were due Sept. 21, but after a recent state Supreme Court decision, the fee structure change is at least temporarily on hold.

According to state Department of Taxation and Finance spokeswoman Susan Burns, the new fees would increase the state revenue stream from $2.6 million in 2008-2009 to $18 million.

A coalition of five retail trade associations filed a lawsuit against the state and on Sept. 18 Justice Thomas Feinman decided to put the fees on hold until a decision on a permanent injunction is made.

State Sen. Betty Little said this week many cigarette retailers have already made the increased payment, and she believes the excess money should be returned to them until a final decision is made.

"I am pleased by the judge's decision," Little said, noting that in light of the restraining order, she is urging the state tax department to return any overpayments.

Last spring, Little opposed Gov. David Paterson's budget due to across-the-board fee increases.

The state's use of the increasingly unpopular tobacco industry as a revenue generator is not new.

Over the last several years, state revenue generated by vice taxes placed on cigarette smokers have nearly doubled.

In fiscal year 2007-2008, smokers paid $220 million in cigarette sales taxes to New York - a 37 percent increase over the previous year.

The $2.75 tax the state tacks onto the sale of each pack of cigarettes amounts to a 45 percent tax, significantly higher than vice taxes associated with alcohol or pornography.

Cigarette retailers argue that the high state sales tax makes it nearly impossible for them to compete with the tax-free tobacco sold on Indian reservations.

But state health officials claim that the increased fees are not only a good place to find much-needed cash, but also a way of improving public health by discouraging smoking - making the addicting habit no longer financially feasible for many New Yorkers.

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