Javier Palomarez, President and CEO of the United States Hispanic Business Council, said on March 3 that New York’s proposed 75% wholesale tax on nicotine pouches would make lower-risk nicotine products less affordable for smokers seeking alternatives to cigarettes.
The proposal is part of Gov. Kathy Hochul’s executive budget and has drawn criticism from business leaders and lawmakers who say it could have negative effects on small retailers and consumers. According to a Times Union report, the new tax would be passed through the supply chain to bodegas, convenience stores, and consumers, making safer alternatives harder to afford across New York.
Palomarez said, “Gov. Kathy Hochul’s executive budget proposes to make this safer alternative far more expensive with a punitive 75% wholesale tax that will drive up prices, devastate small businesses and prevent smokers from moving to lower-risk options. It disincentivizes Americans from quitting cigarettes, thrusts dramatic price increases upon small retailers and drives consumers to neighboring states or illicit markets. These products represent a critical market for New York’s world-renowned bodegas and convenience stores. When we raise taxes and drive up the cost of pouches, it’s not Big Tobacco who suffers. It’s the American family running the corner store on razor-thin margins. High taxes don’t keep money in state coffers. Instead, they push it to New Hampshire gas stations and untaxed online sellers. New York should already understand this reality,” according to Palomarez as reported by Times Union.
Critics point out that high tobacco taxes in New York have previously led to increased smuggling and cross-border purchases rather than keeping transactions within the legal economy. The Tax Foundation’s 2025 update estimated that 51.8% of cigarettes consumed in New York were smuggled into the state rather than bought legally in-state, making it one of the clearest examples of how very high tobacco taxes can fuel black markets and cross-border purchasing instead of keeping transactions in the legal economy.
Concerns about equity have also been raised by Assemblywoman Michaelle Solages, chair of the New York Black, Hispanic, Puerto Rican and Asian Legislative Caucus. She said Hochul’s proposed nicotine pouch tax would “hit low-income people the hardest” and disproportionately impact minority communities while increasing police interactions with bodegas due to enforcement against untaxed underground sales, according to Spectrum News.
Small businesses are particularly vulnerable under this proposal; they make up 99.8% of all businesses in New York and were responsible for 42.4% of net new jobs according to a U.S Small Business Administration profile for 2025. Bodegas, convenience stores, and neighborhood retailers depend on steady legal sales; when Albany makes products pricier, thin-margin operators feel it first before large corporations.
Palomarez leads USHBC as a nonpartisan business advocacy organization focused on ensuring American small businesses have a voice in national policy debates—a role he says makes these concerns especially relevant according to USHBC.
