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TAX NEWS - June 2010

American Tax: Cuomo Trashes Paterson Budget Plan: Says 'No' to Tax Hikes

New York Attorney General and Democratic gubernatorial candidate Andrew Cuomo is proving a canny politician the further he progresses in his career. Thursday, the son of former Gov. Mario Cuomo trashed outgoing Gov. David Paterson's budget plan, saying he opposes plans to tax soda and hike taxes on cigarettes, and favors cutting spending in order to close the state's $9 billion budget gap.

According to the Syracuse Post-Standard, Cuomo also indicated Thursday that as Governor, he would bring down state spending by eradicating state agencies and cutting spending on education, health care and Medicare.

New York's deficit is expected to reach as much as $15 billion next year, with many observers blaming Paterson's big spending approach for the situation.

Republican candidate for Governor Rick Lazio has been bashing Cuomo for failing to detail how he would close the budget deficit, just as Paterson has been dancing around various proposals to deal with New York's current budget crisis.

Just days ago, taxpayer groups and convenience store owners breathed a sigh of relief when Paterson backed off his plan to raise cigarettes by $1 per pack, following Republicans in the State Senate signaling that they would vote against any bill including tax increases.

However, days later, Paterson reversed himself, indicating he would pursue a $200 million cigarette tax hike proposal, packaging it with other proposals which sources say he believes will elicit Senate Republicans' support.

Americans for Tax Reform immediately blasted the move, saying that Paterson's budget crisis "is of his own creation," and arguing that Paterson had "forgotten" his original reason for backing off the tax hike:

"It's an incredibly stupid policy move that will give New York the nation's highest cigarette tax rate and will force New York City smokers to pay $6.25 to the government for every purchase. Which, of course, they won't do - they'll turn to smuggled cigarettes or jump the border to buy in bulk. Tax-paid cigarette sales have declined 8.3 percent annually over the past decade in New York. Expect that to increase - and tax revenue to fall well short of projections - should Paterson get his way."

The New York Association of Convenience Stores has previously spoken out against the increase, arguing that a hike in the tax would force increased cigarette tax evasion as people switch from buying cigarettes from traditional outlets like gas stations—where they are taxed—to Native American reservations, online, or neighboring states, where they either are not, or are not taxed as heavily.

With Paterson set to leave office, opposition groups say it is unclear what political pressure can be brought to bear on him to drop taxes and tax hikes from the budget, though some remain hopeful that Senate Republicans can be persuaded to reject Paterson's current proposal.
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