NEW YORK -- A new congressional report obtained by News 4 New York paints a disturbing picture of New Yorkers unwittingly supplying millions of dollars to terrorist organizations.

The money pipeline begins with the sale of bootleg cigarettes.

The report from the ranking Republican on the House Committee on Homeland Security will be released Tuesday. In it are allegations that cigarettes that begin at Indian reservations in New York end up generating millions of dollars for Hamas and Hezbollah unbeknown to smokers just looking for a bargain.

As a New York City smoker, Mike Esposito said he gets tired of paying $7.50 for a pack of cigarettes. He said sometimes he will buy cigarettes at a tax-free Indian reservation.

Rep. Peter King, R-N.Y., was critical of the practice.

“No such thing as a free ride, a free meal or a free cigarette,” he said. “You’re getting that cigarette at a much-reduced price; be concerned the profits are going to fund America’s enemies, Hamas and Hezbollah.”

Sound extreme? King, the ranking Republican on the House Committee on Homeland Security, said the terror connections are real.

His staff just wrote a report titled, “Tobacco and Terror,” which concludes from cigarettes alone, “A motivated terrorist cell could generate sufficient funds to carry out another Sept. 11th style attack, which operational costs were estimated to be $500,000.”

King said bootleggers, mostly immigrants from the Middle East, buy truckloads of cigarettes on reservations outside Buffalo and then sell them downstate.

They send the huge profits back home, according to federal authorities.

“I would urge Gov. Paterson to do what he can to get the full state resources to collect taxes on these Indian reservations,” King said.

A spokesman for Gov. David Paterson, citing the state’s economic forecast, said, “The governor believes we have to examine every possible way to get revenue. That includes exploring collecting the cigarette tax from Indian reservations.”

However, the last time the state tried to regulate sovereign territory more than a decade ago, it led to fires on the thruway and clashes with the state police on the Seneca and Cattaraugus Indian reservations.

King said the bootleg problem could get worse starting June 3 when the price of a pack in New York goes up another $1.25.