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New York's tax attack gears up

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After years spent dreaming of casinos, New York tribes are finding that a
threat to their basic sovereignty has crept up on them while they napped.
The Suffolk County police siege of the Poospatuck reservation opens a state
attack on Indian tax sovereignty which could unravel a decade of economic
and social progress.

Under orders from the state Legislature, Gov. George Pataki's
administration is preparing to impose tax regulations on reservation sales
that it first tried to enforce in the mid-'90s. New York Indians might have
thought they defeated this measure in 1997; but it is back again, due to
take effect March 1.

The grass-roots Indian rebellion of spring 1997 is one of the stirring
episodes of modern tribal history. Although a number of tribal leaders had
signed tax compacts with the state, two tribes -- the Seneca and the
Unkechaug -- held out. Protests spread, closing interstate highways. Clan
mothers chastised leaders who had compromised. The Mohawks joined in. As
state police lost control, beating women and children at Onondaga, Pataki
backed down. At the end of May, he flew to Buffalo to make a dramatic
speech promising respect for tribal sovereignty. In spite of a U.S. Supreme
Court decision upholding the regulations drafted by his Department of
Taxation and Finance, Pataki said the state would no longer attempt to tax
reservation sales, whether to Indians or non-Indians.

It was a wise policy and a great victory, not only for the tribes but for
the best instincts of the Republican Party. Reservation tax sovereignty
happened to mesh nicely with the party's "supply-side" economics, which
sought economic growth through tax reductions. During the decade that
followed Pataki's speech, entrepreneurs flourished on the reservations that
were open to them, and Indian governments with commercial acumen built up
their own enterprises. The tribes launched hundreds of small businesses and
created thousands of jobs, for the most part without help from casino
revenues. Republicans, inspired by Jack Kemp, simultaneously tried to spur
economic growth in tax-free districts they called Empire Zones, but their
results paled beside the success on the reservations.

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Yet Republicans now seem eager to destroy their one successful social
program, the one policy that has helped bring hope and prosperity to what
was once the most oppressed and impoverished population on the continent.
Pataki argues that the state Legislature tied his hands. Under lobbying by
convenience store and gas station associations, the narrowest of special
interests, both houses passed a law demanding taxation of the reservations.
Pataki vetoed it once, but his protests ring hollow. For years, his
negotiators have worked to reverse his one wise deed, demanding tax
concessions whenever possible as they worked out deals on land claims and
gaming compacts.

It should be said that Democrats haven't been any better. The House,
controlled by Democrats, pushed for the tax regulations as hard as the
Republican Senate. Democratic state Attorney General Eliot Spitzer has
steadily tightened the noose on reservation economies. He has been
pressuring credit card companies and delivery services not to process
Internet sales of cigarettes, a major business on the Seneca reservations:
and now he is turning the screws on cigarette distributors not to supply
unstamped cigarettes to the reservations themselves. He hasn't mentioned
Indians in his frequent press releases, perhaps to avoid roiling his
upcoming campaign for governor, but the legal documents make it crystal
clear that he is preparing a crackdown when the tax goes into effect March

The tribes are divided and poorly prepared for the onslaught. The Seneca
have done the most, with a public relations campaign focusing on their own
treaties. But their businesses are reeling from the Internet crackdown. The
Unkechaug are facing harassment from the Suffolk County district attorney,
a campaign that looks a lot like part of a master strategy. It's no
coincidence that Unkechaug Chief Harry Wallace, a trained lawyer committed
to tribal sovereignty, was one of the main leaders of the 1997 resistance.
Other tribes have been diverted by their quest for casinos. Some emigre
Iroquois tribes sold out the tax struggle entirely, accepting state
taxation as the price for regaining territory in the state and a slice of
the potential gaming market. In that sense, the collapse of their land
settlements last year now looks like a blessing. As once-steadfast
Haudenosaunee nations increasingly make assessments based on percentages
rather than principles, their very existence as the originally free and
inherently independent peoples of their own lands is jeopardized.

Even the St. Regis Mohawk (Akwesasne) accepted a weak deal in attempting to
protect their thriving reservation businesses. They gave up tax sovereignty
over their potential Catskills casino in return for a promise that the
state tax department would "take into account" their self-regulation of
their cigarette and gasoline sales in the Akwesasne homeland. This deal was
supposed to produce a commercial treaty in lieu of the tax regulations, but
the Legislature never passed the bill providing for that process. And the
state showed bad faith from the get-go, demanding to tax big-ticket
reservation sales like cars and boats. The tribes that let the tax issue
lapse in their dreams of casinos can now awaken to the irony that the only
newly opened gaming facilities in the state belong to the Seneca Nation,
which steadfastly refused to make any concessions on its tax sovereignty.
The Seneca position should have been the template for all the other tribes,
and it shows the true intentions of Pataki's negotiators that they tried to
get as far from it as possible in all their other settlements.

It will take a supreme effort for the New York tribes to regain the spirit
of '97, but they have little choice if they are to protect the gains of the
last decade. The evidence is that tribes that compromise their sovereignty
to get casinos usually wind up with neither.