(The Center Square) — New York Gov. Kathy Hochul is facing pushback on her plans to tax nicotine pouches from critics who warn it will fuel the illicit market and hurt the state’s retailers.
In a letter to legislative leaders, Erie County Sheriff John Garcia urged them, as they consider Hochul’s preliminary budget plan, to reject her proposal to set a 75% tax on the nicotine products.
“New York already faces widespread trafficking of vapes and other regulated goods,” he wrote. “Experience shows that steep tax increases rarely reduce demand; they push it underground.”
Garcia, the top law-enforcement official in Hochul’s home county, joins a growing chorus of criticism against the plan to tax nicotine pouches like Zyn and FRE at the same rate as cigarettes, which currently face an excise tax of $5.35 per pack, one of the highest rates in the nation.
Retailers and business advocacy groups, including the New York Association of Convenience Stores and the Business Council of New York, have formed a new coalition to oppose the proposal, saying it will hurt small businesses and fuel black-market sales.
Hochul, who is pitching the proposal as part of her $260 billion preliminary two-year budget, has framed the tax increase as a pushback against big tobacco, saying nicotine products are harmful and addictive, and should be taxed like other tobacco products, like cigarettes and chewing tobacco.
“The Governor’s proposal is a common-sense measure to improve public health at large, push back against manipulative tactics by big tobacco companies and increase necessary protections against life-threatening products,” a Hochul spokesperson said in a statement.
State budget writers expect the new levy — dubbed by some as the “Bro Tax” — would bring in $18 million in revenue in its first year, rising to an estimated $50 million a year once fully implemented.
But critics argue that it will also fuel New York’s multimillion-dollar illicit market and punish law-abiding retailers who sell the products.
New York is already one of the top states in the nation for cigarette smuggling, with more than half of the cigarettes consumed in the state — about 53.5% — purchased from illegal outlets or smuggled across state lines, according to recent reports by the Tax Foundation, a Washington, D.C.-based fiscal watchdog.
The report’s authors said the move by New York and other Northeast states to raise cigarette taxes and ban certain tobacco products has made cigarette smuggling both a national problem and a lucrative criminal enterprise. That’s costing the state millions of dollars a year in anti-smuggling enforcement, according to the report.
New York has the highest cigarette taxes in the nation, charging $5.35 in excise taxes per pack, compared to $3.51 in neighboring Massachusetts and $3.08 in Vermont. The state increased the rate by $1 per pack in 2023. New York City levies an additional excise tax of $1.50 per pack, bringing the combined tax rate to $6.85 in the Big Apple.
The state’s enforcement officials have been seizing a sizable amount of banned and untaxed vaping products linked to cross-border smuggling in recent years, including a 2023 New York City raid where authorities seized more than 1,800 cartons of cigarettes and $155,000 in cash.
