NEW YORK (CNNMoney.com) -- New York City smokers already pay the highest cigarette taxes in the nation, but a new state law will push those taxes even higher this summer.
The state legislature on Monday approved a bill adding an additional state tax of $1.60 to every pack sold, effective July 1. This bill, which was signed by Gov. David Paterson on Monday, will raise the state tax to $4.35 per pack. That makes the Empire State's tax on smokes the highest in the nation.
New York City smokers pay an additional municipal tax of $1.50 per pack, for a current total tax of $4.25 per pack. That's the highest state-local tax whammy in the country, according to the Campaign for Tobacco-Free Kids. Chicago is the runner-up, at $3.66 per pack.
This new tax increase means that smokers in the city will pay $5.85 per pack in taxes. This drives the average local price up to nearly $11 per pack, according to some estimates.
The tax hike is aimed at generating an additional $440 million in 2010-2011 tax revenue to support healthcare programs.
The bill also requires that cigarettes sold at Native American reservations be taxed. State Sen. Jeffrey Klein, a Democrat representing parts of the Bronx and Westchester County, said that taxes on reservation-sold cigarettes will provide the state with $150 million in revenue during the remainder of 2010, followed by $500 million in annual revenue thereafter.
This will be a financial hit to tribes like the Shinnecock Indian Nation in Southampton, where several stores sell tax-free cigarettes.
"We've had very preliminary talks with not only Gov. Paterson but the Spitzer administration, so we knew this was coming and we're following it closely," said Randy King, chairman of board of trustees for the Shinnecock Indian Nation, which was recently recognized by the federal government. "We're just going to take the information back to the tribe and see what direction we get on how to approach it."
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