Coupons, regulations and state taxes in New York
The new governor of New York, Democrat Eliot Spitzer, vowed on Jan. 8 to finally force reservation-based Indian retailers to collect state taxes. The promise comes on the heels of a ruling by a state Supreme Court justice that blocked the enforcement of tax collection legislation.
In 2005, the state Legislature passed a law mandating that state excise taxes on tobacco and fuel products be collected on sales to non-Indian customers. One element of the collection regime was that Indian customers, from whom state taxes are not collected on reservation-based transactions, would be issued exemption coupons by the state. These would then be redeemed at the point of sale for good purchased for personal use, in lieu of paying the tax. The law took effect on March 1, 2006, but the former governor, Republican George Pataki, directed the state Department of Taxation and Finance to not enforce it; no coupons were ever issued.
On Jan. 2, Judge Rose Sconiers of the state Supreme Court issued a preliminary injunction that prevents Albany from collecting cigarette taxes sold on the state's several Indian reservations. She cited the state's failure to issue the exemption coupons to Indians, which, along with a lack of regulations governing their use and other deficiencies, means that the law cannot properly operate and is thus unenforceable.
''While the intent of the statute is to require non-Indians who purchase cigarettes on Indian reservations pay the state stamp tax, the statute can only function if it properly exempts Indians purchasing cigarettes under circumstances where they are not lawfully required to pay such taxes,'' Sconiers wrote in her decision. The case is Day Wholesale Inc. and Scott B. Maybee v. State of New York.
Predictably, the new governor weighed in. He said that the law will be enforced.
''I believe in both a level playing field in respect to competition in the marketplace,'' Spitzer told the Buffalo News, ''and also appropriate respect for the sovereign nations. But I think the statute that was passed a couple years ago was an appropriate statute so we will be moving forward.''
In the coming months, look for the state tax department to make rules and print coupons. Such measures will make the law legitimate in the court's eyes. But what about the Indians' perspective? What about the treaties that designate reservation lands as beyond the state's taxation arm?
Like many other New York politicians, Spitzer mouths ''appropriate respect'' for Indian sovereignty. But by invoking the ''level playing field,'' he undermines whatever respect he claims to have. This phrase is the mantra of the state's convenience store lobby, which for years pressured Spitzer's predecessor to force tax collection on reservation fuel and tobacco sales to non-Indians.
Respecting Indian sovereignty means more than just paying lip service to it. Perhaps Spitzer means that it is not appropriate to respect Indian sovereignty when the tax-hungry state has its eye on sucking in more revenue?
The art of compromise
Previous attempts to force state tax collection upon reservation-based merchants sparked violent reprisals, most recently in 1997, and made Pataki learn the hard way. Hopefully Spitzer will realize that this issue has potential resolutions other than shoving tax collection down the collective tribal throat.
One would be to work on reducing New York's onerous tax burden, the wily fingers of which extend into all facets of the state's commerce.
At the start of 2006, New York ranked 10th nationally in terms of excise taxes levied per pack of cigarettes at $1.50 per pack, according to the Federation of Tax Administrators, a group representing the tax collection agencies of states and other jurisdictions. And the Public Policy Institute reports that New York ranks third nationally, at 43.5 cents, in the amount of state and local taxes levied on each gallon of gasoline sold. Only Connecticut (45 cents) and California (44.7 cents) are higher. These numbers are based on gas prices in July 2006; PPI is affiliated with the Business Council of New York State.
Why not knock the cigarette and gas taxes down a notch or two? This would not only help to ''level the playing field'' by giving non-Indian retailers fewer tax dollars to collect; it might also help the state's miserable economic climate by sucking less money out of residents' pockets. It may even help to stem the ongoing exodus of New Yorkers for other less expensive locales.
It is certainly unfortunate that the threat of violent reaction hangs over this issue. And that potential for upheaval comes directly from Albany's apparent inability to fathom the concept of compromise. Dictionary.com defines the noun ''compromise'' as ''a settlement of differences by mutual concessions; an agreement reached by adjustment of conflicting or opposing claims, principles, etc., by reciprocal modification of demands.''
In other words, if you truly want a deal that both sides can live with, there's got to be some give and take. In his dealings with the various nations, Pataki at least attempted to negotiate comprehensive deals to try to resolve land and taxation issues. His only success, a February 2005 agreement with the three Mohawk governments at Akwesasne, fell apart last summer after the U.S. Supreme Court refused to hear an appeal by the Cayuga Nation, effectively torpedoing that tribe's land claim case.
Trying to force the tribal governments surrounded by New York to collect state taxes is like training a magnifying glass on a pile of dry leaves on a sunny day. Real attempts at compromise do not involve pandering to the interests of a special interest group, as Spitzer appears to be doing for the convenience store lobby. True compromise involves taking both sides' concerns into account when searching for a solution.
What can Albany give up? How about its loophole-ridden Empire Zone program? This farce has cost the state millions of dollars in tax revenue in return for minimal job creation.
What can the Indians give up? The answer begs this question - what have they already given up, both through treaties and via fraudulent land transactions?
Will Spitzer learn from Pataki's example? Let the Games Begin sincerely hopes that it won't take a violent Indian response to get Spitzer to consider government-to-government negotiations with tribal leaders to find alternative solutions to this vexing conundrum. Hopefully Spitzer won't force the issue by provoking it.