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New York state’s tax crisis simmers across range of issues

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ALBANY, N.Y. – Tribal struggles for tax sovereignty are heating up across New York state as the four-term administration of the sometimes sympathetic Republican Gov. George Pataki nears its end. As reservation governments and businesses brace for a more hostile political climate, the coordination called for by some still appears lacking; but tribal advisers maintain that the will to resist state tax encroachment remains strong.

The burning question is whether the reservation sales tax issue will boil over during a nationally watched election for governor. The leading candidate, Democratic convention nominee Eliot Spitzer, has been steadily ratcheting up pressure on reservation cigarette sales in his current capacity as state attorney general. He has moderated his public stand on tribes, to the point that a potential primary opponent is making it an issue. But he recently intensified his administrative campaign to choke off wholesale cigarette supplies to reservation retailers.

The state convenience store lobby, a hearty enemy of tribal competition, is trying to parlay its dominance of the state Legislature into a series of lawsuits against the Pataki administration and reservation economic players. With strong encouragement and financial support from non-Native gas station and retail groups, the state House and Senate passed a budget amendment in 2005 directing the executive branch to collect the state sales tax on reservation sales to non-Natives. Pataki and his Department of Taxation and Finance have ignored the directive, prolonging a nearly 10-year policy of leaving reservation economies untrammeled.

The New York Association of Convenience Stores and several allies are now in court asking state judges to compel Pataki and his tax men to enforce their measure. A lower state court in Albany heard the first arguments June 30. Just before, on June 20, the state Legislature passed a further bill in effect setting up a black list of wholesalers who supply reservation stores. Pataki has 55 days to decide whether to veto the bill.

Several lawyers for reservation interests indicated that the latest bill raised constitutional issues that could take years to settle. “It’s clearly unconstitutional,” said Joseph Crangle Jr., lawyer for the Seneca Nation of Indians. “I’m sure it will be litigated.”

In the meantime, some tribes and tribal businessmen are organizing against the state pressure. Frustrated by the lack of statewide coordination, the two state-recognized tribes on Long Island launched their own Native American Business Alliance, which they describe as a “grass-roots effort to protect our economic independence.” The group held a press conference and rally June 14 at the Unkechaug Tribal Nation pow wow grounds on its Poospatuck Reservation and then led a caravan to the Shinnecock Reservation at Southampton. The group has also started up a Web site, www.SupportNativeBusiness.com.

“It’s not just a smokeshop fight,” Unkechaug Chief Harry Wallace told the rally. “It’s not just a business fight. It’s a fight for our people.”

Wallace emphasized that the group had grass-roots support from members of the six nations of the Haudenosaunee (Iroquois), as well as the Pequots of Connecticut and the Narragansett of Rhode Island.

Native businessmen from the Seneca Nation have sponsored private initiatives ranging from court challenges to poll-taking. The Seneca Business Steering Committee paid for a significant poll by Zogby International, which reported that a stunning 79 percent of New York state voters backed the governor against the Legislature on delaying reservation taxes. A group led by Seneca entrepreneur Scott Maybee has started several lawsuits against anti-cigarette legislation. Attorney Margaret Murphy represented Maybee and cigarette distributor Day Wholesale in the June 30 arguments against the convenience store lawsuits.

The lineup resembles the pattern of the Native tax protests of the spring of 1997, which spread after Wallace and the Unkechaug and the businessman-led government of the Senecas held out against state pressure to sign tax compacts. Grass-roots activists on other reservations, notably the St. Regis Mohawk and the Onondaga, repudiated leaders who had accepted a state plan for pre-collecting the sales tax on non-Indian sales. As protesters closed interstate highways and clashed with state police, Pataki withdrew the regulations. In a May 22 speech, he proclaimed a “new era of peaceful cooperation” with Indian sovereignty.

His commitment to this era weakened in recent years, however, as the prospect of lucrative casinos gave the state more leverage over tribes. Although Pataki twice vetoed the recent legislative attempts to impose the reservation tax, his negotiators continued to seek tax concessions in broader talks over land-claims settlements and casino compacts. Several out-of-state tribes completely accepted state tax collections in return for a global settlement including a casino, until the talks were upended by federal court decisions quashing the land suits.

The Seneca Nation refused to accept any discussion of state taxes in negotiating the compact that authorized three casinos in western New York, two of which are up and running at highly profitable rates. The St. Regis Mohawk tribal council initially accepted state sales tax collections at a long-sought casino in the Catskills. After the narrow failure of their land-claim settlement bill last year, however, they appear to have stiffened their position.

In a recent mitigation agreement with Sullivan County, site of the projected Catskills casino, the St. Regis Mohawks offered an alternative to its previous state tax agreement. In the absence of a state compact, said the agreement, the tribe would provide a “payment in lieu of taxes” directly to the county. Although the amount would equal the projected state sales tax collections at casino businesses, a PILOT payment does not acknowledge that the recipient has taxing authority.

The agreement also rejected the earlier state position that only sales to members of the tribe were nontaxable. It explicitly states that sales to all Natives are exempt.

After an earlier settlement with the state, the St. Regis chiefs then in office promised that any trade agreements involving taxation would be submitted to the Akwesasne community for approval. The proposed land settlement went through a series of public meetings and referenda in the Mohawk territory on both sides of the U.S./Canada border.

The unforeseeable factor, however, would be the policy adopted by Spitzer, the widely regarded front-runner, were he to be elected governor in November. Would he continue the punitive approach of the attorney general or would he embrace the “peaceful cooperation” of the present governor?

“We’re always praying to the Holy Spirit to enlighten him,” said the Seneca Nation’s attorney, Joseph Crangle.