Last summer, some genius in Albany had the bright idea to raise the tax on cigarettes. The state wasn’t trying to make cigarettes so costly that people would stop smoking and save their health.
Albany’s motives weren’t that high-minded.
No, the state wanted — make that “needed” — more revenue. So the tax went up by $1.50 a pack.
At around that same time New York State also halted virtually all enforcement against people who were smuggling cigarettes in from other lower-tax states.
This enforcement shutdown was caused by a petty squabble that I reported at the time.
Cigarette investigators, including a number of confidential informants who were risking their own safety, hadn’t dotted all the i’s during their sting operations and some Albany bureaucrats were having a hissy fit. (Important criminal cases are also said to be in jeopardy because of these bureaucrats’ snit, but that story will have to wait for another day.) What was the end result of the higher cigarette tax? Instead of gaining revenue from the tax increase, the state will lose about $450 million in revenue.
Smokers did what smart consumers always do; they made purchases in nearby states with lower taxes and on Indian reservations, where there is no cigarette tax.
Retailers located in New York counties that border other states have seen a 31 percent decrease in the number of packs they are selling, according to state figures.
But the state’s loss doesn’t end with that $450 million.
Nobody has a good handle on how many packs of cigarettes are smuggled into New York and sold with counterfeit tax stamps that make them look legit. The best guess, though, is around 250 million packs each year.
The state would lose $1.54 billion in tax revenue on those packs.
So, combined, the effect of the tax increase plus the cutback in enforcement is costing Albany tax coffers a total of around $2 billion a year.
Back in January I vowed to find $1 billion in tax revenue that New York State wasn’t collecting.
The idea was simple, but not easy: if you can increase the amount of revenue coming into the state’s coffers, then you would not have to cut as many services, lay off as many employees, increase taxes as much or use whatever diabolical remedy the politicians could come up with.
Makes sense, right?
Well, not in Albany, where right now your elected officials are trying to cut $10 billion in services and spending.
It isn’t that cuts shouldn’t be made — there is waste. Sadly, this is the simplistic and politically opportune way of doing things these days. But Albany should also make a reasonable effort to collect taxes that are due.
I hit my $1 billion target last month in a series of columns I’ll detail below.
The amount of revenue I’ve now found adds up to $3 billion — $2 billion in lost cigarette revenue plus $1 billion from other things. That $3 billion is nearly one-third of the amount that it took politicians weeks to come up with through cutbacks.
And there’s no telling if Albany’s cuts will ever be made.
I made certain that a person close to the Cuomo administration was informed about our findings. And I was naively expecting that Albany would jump on this stuff in a New York minute.
The person I dispatched with our findings to the new governor and his associates was ignored.
What did I try to pass on to the governor?
* In a Jan. 13 column my sources explained that evildoers have been filing false tax returns and claiming refunds they didn’t deserve. And not just one return here and another there — but dozens from locations known in the criminal world as “refund mills.”
That scam is costing the state about $400 million. Tax refunds are probably being delivered right now to undeserving people because Albany didn’t act.
The state tax department did announce last week that it had snagged 16 tax preparers who claimed refunds they and clients didn’t deserve. Sixteen, stealing well under $1 million. Of course it’s good these people got caught, but these are nowhere near the numbers that could have delivered.
* On Jan. 25, I reported that high-tech software attached to sophisticated cash registers was allowing bars and restaurants to make sales transactions and the tax on those sales disappear. That’s another $400 million or so in lost revenue, my sources estimate.
Albany didn’t have time for this one either. But it seems that the Manhattan District Attorney’s office may have taken up this investigation.
* On Feb. 15, this column reported on a corporate check-cashing scheme that allows companies to avoid paying sales and wage taxes. The Manhattan DA has cracked down on a few of these abusers over the years, but stricter enforcement by the state or an outright ban of these check-cashing enterprises would help New York capture another $200 million.
So: $400 million + $400 mil lion + $200 million = a lot of teachers’ jobs that wouldn’t be lost.
That $1 billion plus the $2 billion in missing cig arette revenue will never be recovered..
Three billion dollars! And all New York State has to do to get this money is stop being so damned stupid. jcrudele@nypost.com