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New York's Paterson Wants Higher Tobacco Taxes to Help Narrow Deficit Gap
New York Governor David Paterson wants to raise tobacco taxes and collect levies on cigarettes sold to outsiders from American Indian reservations.
The proposals are part of Paterson’s 12th consecutive emergency spending plan, scheduled for a June 21 vote, to keep the government operating for another week. The measure is needed as lawmakers and Paterson haven’t agreed on a comprehensive budget that closes a deficit estimated at $9.2 billion when the fiscal year began on April 1.
“Our anticipation is that the budget extender will pass,” said Robert Megna, the state budget director, who described the weekly measure to reporters at the state Capitol in Albany.
New York, the nation’s third-most populous state, would expect to receive about $290 million this year from a $1.60 per pack increase in the cigarette tax, to $4.35, and a boost in the wholesale tax on other tobacco products, such as snuff and cigars, to 75 percent from 46 percent. Collecting taxes on cigarette sales from reservations would raise $150 million.
The estimated $9.2 billion deficit in Paterson’s $135.2 billion budget, submitted earlier this year, has been reduced by about half, Megna said. The additional tobacco revenue, plus spending cuts and savings in budget bills already passed or pending, and cuts in agency expenses that Paterson can order without lawmakers approval, have narrowed the deficit by between $4.5 billion and $5 billion, he said.
June 28 Deadline
Paterson earlier this week set a June 28 deadline for lawmakers to agree on a budget, which he said must not include borrowing. If there is no agreement, the governor said he would resubmit his original budget. That includes a 1 cent per ounce tax on sweetened beverages and larger cuts in school aid that many lawmakers don’t favor.
If legislators don’t approve the weekly spending plan, which provides appropriations to pay state workers for another week, they would cause a government shutdown, said Morgan Hook, a Paterson spokesman.
New York’s bond rating hasn’t suffered from the late budget or “very difficult state political process,” Moody’s Investors Service said yesterday as it affirmed an Aa2 grade, the third highest, for the state’s general obligation bonds.
“It appears likely that the state will solve the budget gap with some combination of spending cuts, revenue increases and one-time revenues that will not imperil the long-term fiscal health of the state,” the rating company said in a report.
Departmental Cuts Made
The Assembly yesterday trimmed the deficit by about $1.05 billion in budgets approved for departments including public safety, transportation and economic development, Megna said. After the Senate has an opportunity to study the measures, they “will pass,” said Travis Proulx, a spokesman for Senate Majority Leader John Sampson, a Democrat of Brooklyn.
The bills also would cut $302 million from aid for New York City. The state cut municipal aid payments to other cities by 2 percent to 5 percent, or about $15 million in all, budget documents show.
While Senate Democrats have opposed any tax increases in spending plans, Megna said they might be swayed to accept higher tobacco levies as a way to avoid even larger cuts in health-care programs.
“Full consideration has to be given to all responsible proposals which balance the budget and maintain necessary funding for health and Medicaid programs,” Proulx said.
Politicians of both parties have pushed to resume collecting revenue on cigarette sales from American Indian reservations. The state hasn’t tried to make the collections since the early 1990s, when an attempt resulted in violent opposition that injured a state trooper and closed the main Albany-to-Buffalo highway. Court rulings have affirmed the New York’s right to collect the taxes.
To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net.
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