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Reject Tax Hikes in the New York State Budget!
An Open Letter to the New York State Legislature
May 24, 2010
On behalf of the National Taxpayers Union's 18,000 members in the state of New York, I urge you to oppose any tax hikes currently under discussion amidst the latest budget crisis.
New York's budget deficit is the result of massive state spending. In the past decade, spending has skyrocketed by $35 billion, outstripping inflation by $21 billion and personal income growth by $17 billion. New York now faces a budget shortfall of nearly $10 billion. Additionally, the state has the third-highest tax burden per capita and one of the ten worst business tax climates in the nation. It is puzzling, then, that one proposed solution to the deficit is to impose almost $1 billion in tax increases on cigarettes and "sugary" (as defined by public officials) drinks. While some see these products as easy targets for taxation, the reality is that taxing them more punitively will hurt small businesses and the poor. Not to mention, these taxes rarely, if ever, produce the promised revenue.
After New Jersey raised its cigarette tax, the state reported a $52 million shortfall in collections from the tax. The National Association of Convenience Stores reports that cigarettes account for about 33 percent of total sales nationwide at their establishments. If cigarette taxes rise, the retail price will increase and convenience stores in New York will lose business as residents and visitors cut back their purchases. Additionally, since the poor are more likely to smoke, New York's lower-income families, such as those who live in areas of the Upstate region and Bronx County, will especially feel the pinch of this tax. With a federal cigarette tax increase already having taken effect, the tax hike would amount to a one-two punch aimed at New York's worst-off citizens.
If the penny-per-ounce tax on sugary drinks passes, the price of a two-liter bottle of soda could rise by about 67 cents. An average-size container of powdered drink mix, such as lemonade or iced tea, could cost up to $3.84 more. Since poor families tend to consume proportionally higher quantities of drink mix (because an average container produces as much as three gallons of beverage), the tax increase on sugary drinks will hit this economic segment the hardest.
Instead of raising taxes on products like cigarettes and sugary drinks to close the budget gap, New York needs to cut its spending to a manageable level and reform its burdensome tax code to spur economic growth. This recession has forced New Yorkers to prioritize their expenses and then cut what they cannot afford. It is only reasonable for their government to do the same in crafting the 2010-2011 budget.