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December 22, 2005
Governor George E. Pataki
Albany, NY 12224
Dear Gov. Pataki:
On behalf of the more than 700,000 FreedomWorks members nationwide and the more than 27,000 New York FreedomWorks members, I am writing to urge you not to propose any new taxes or tax increases in the budget proposal you are preparing for release in January.
The simple truth about taxes, as Nobel laureate Edward C. Prescott recently pointed out in the Wall Street Journal, is taxes distort behavior. As a result, tax increases do not necessarily raise the revenue the government expects. For example, between 1992 and 2000, the average state cigarette-tax rate increased by 64%. However, gross state tobacco-tax revenues only rose by 35%. Cigarette smuggling, encouraged by higher cigarette taxes, is a key reason why cigarette-tax revenues are not keeping pace with tax increases. You need look no further than New York City for proof. The Cato Institute reported in 2003 that about half of all cigarettes consumed in New York City avoided state and city excises. As Internet usage increase, this number is likely to grow much faster.
This is an issue on which economists on both sides of the political isle agree. Joining pro-taxpayer rights groups like FreedomWorks are left-leaning groups like the Center on Budget and Policy Priorities (CBPP), who also warn states against expecting too much revenue from higher cigarette taxes. Raising taxes on consumer goods, like cigarettes, is regressive. The CBPP agrees with this concern that low income individuals, who tend to smoke in higher numbers than those with high incomes, may be unduly burdened.
It is also damaging to the many small business who rely on cigarette sales to keep their stores—and the jobs and tax revenue they bring the state—afloat.
While we have unfortunately had to oppose several Governors who we thought were friends of the taxpayer, but instead sided with the tax-and-spend lobby, we hope that you will stick to the principles that have earned you your national reputation as a leader who is willing to stand up to would-be tax hikers. Governor, FreedomWorks is here to offer you grassroots support as a Governor who opposes tax increases.
More importantly, for the sake of New York’s workers and the state’s economy, resist the urge to raise taxes.
President and CEO