New York Targets Bagels to Fill Budget Hole

New York, like most states in the nation, is facing a nasty budget hole which Gov. David Paterson attempted to fix earlier this summer by pushing through a tax hike on cigarettes. A pack of smokes now costs as much as $13 in Manhattan, but the high taxes being levied may not be helping to close the state’s budget gap. Revenue from cigarette sales following implementation of the 58 percent increase in tax levied by New York State totaled $125 million last month. During July 2009, it totaled $119 million.

Now, facing ongoing budget problems, New York is moving to impose taxes on a good the state is known for producing, and which many of its residents consider indispensible: The bagel.

An obscure provision in New York’s tax law allows Albany to tax “sliced or prepared bagels (with cream cheese or other toppings),” and the tax collectors are moving on bagel shops across the state. A particular target appears to be Kenneth Greene, who owns over thirty Bruegger’s Bagel franchises in New York. Greene’s customers are livid at the eight-cent per bagel tax being levied. In response to customer outrage, Greene has posted signs reading “We apologize for this change and share in your frustration on this additional tax.”

Other bagel shop owners meanwhile are holding out hope the tax collectors refrain from targeting them next. “I hope they don’t come after me for that,” said Florence Wilpon, a founding owner of Ess-a-Bagel in Manhattan, per a quote in the Wall Street Journal.

Taxpayer advocates have repeatedly argued that the best way to close budget deficits is to cut spending, rather than pursue tax gimmicks and other measures designed to increase revenue from consumption of various goods. No doubt many bagel-munching New Yorkers now find themselves in agreement.