Taxable Talk

New York already already has the second worst tax climate in the country according to the Tax Foundation. Governor David Paterson today announced a budget that seeks to add or increase 88 taxes and user fees.

User fees are just another form of taxes, and as I’ve said before all taxes and fees are passed on to consumers. New York faces another difficulty in adding taxes: its proximity to other states. If clothes cost more in New York, consumers can always go to New Jersey or Connecticut.

There are some planks of Governor Paterson’s budget that deserve praise. Governor Paterson proposes eliminating seven state agencies. He also proposes the smallest increase in spending in years, just 1%.

Here are just some of the taxes/user fees that are proposed:
– An increase on the tax on beer, wine, and flavored malt beverages;
– An iPod tax on digital downloads;
– State sales tax on entertainment purchases, taxis, buses, limousines, and satellite and cable television;
– A $0.50 cigar tax;
– An 18% tax on non-diet sodas; and
– Luxury taxes on expensive cars, yachts, airplanes, furs, and jewelry.

Of course, this is just a budget, and it must be approved by the New York state legislature. Governor Paterson told the New York Daily News, “If you start taxing at times when [revenues are] receding, you’ll drive job creators out of the state.” He could teach California’s legislature and governor something about basic economics. We’ll see if the New York legislature understands that.

In New York state there’s been a festering battle between state government and Indian tribes regarding cigarette sales. There were several developments last week.

Judge Kenneth Fisher of the state Supreme Court (equivalent to a district court in California) ruled that the Cayuga Indian nation cannot sell tax-free cigarettes at its stores in Union Springs and Seneca Falls, New York. Judge Fisher noted that the stores are not on Indian reservations. District attorneys in Cayuga and Seneca counties plan on presenting charges to grand juries. The Cayuga Indian tribe will appeal, and that battle could last years.

Meanwhile, a bill that would tax all Indian cigarette sales in New York is awaiting the signature of Governor David Paterson. Indian nations complain that this legislation, if signed, is an attack on their sovereignty. The Buffalo News is reporting that Paterson will sign the legislation though it will take some time to craft regulations to enforce the new law. Additionally, a legal challenge by the Indian tribes is almost certain.

Finally, the New York Times has an excellent article exploring New York City’s battle with a nearby Indian tribe that sells a lot of tobacco. New York City is suing the tribe. With most government budgets being under stress you can expect all local governments to go after anything that even looks remotely promising as a source of funds.