On taxes, negotiation is the only path

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A New York state bill intended to enforce collection of taxes on tobacco products sold by Indian-owned businesses was signed into law by Gov. David Paterson last week.

This is a discriminatory, deeply flawed law.

In a signing statement on Dec. 15, Gov. Paterson somewhat awkwardly touted the bill as an enforcement of state law and nothing else. Then he affirmed that his “commitment to the sovereign powers of New York’s Indian nations has not and will not waver.” The statement confounded Indian leaders and observers to say the least. It’s not clear how the governor will reconcile these conflicting ideas as negotiations with tribal leaders continue, or what negotiations can accomplish without an acknowledgment that this latest legislation is an attack on Indian sovereignty. The ability to tax is a defining sovereign power; one nation cannot tax another. New York State has every right to collect taxes from its own citizens, as Gov. Paterson asserts, but it does not have the right or wherewithal to regulate the commerce of sovereign Indian nations.

The new law takes a different approach from other legislation enacted by New York but never enforced. It shifts the burden to manufacturers, prohibiting them from selling tobacco products without a tax stamp to any wholesaler that doesn’t certify the cigarettes won’t be resold tax-free by Indian retailers to non-Indian consumers. The law basically asks wholesalers to collect excise taxes up front and pass them on to the state. It’s not known whether wholesalers will object to becoming tax collectors, since at least one, Day Wholesale Inc., challenged the state and won an injunction against a similar 2006 law.

The responses so far from tribal leaders have been wide-ranging, but all agree that they will keep up the fight. The issue is not cigarettes, pointed out Seneca President Barry E. Snyder Sr., but “the protection of the [Seneca] nation’s treaty rights.” The Oneidas express doubt that this particular development will result in revenue for New York. “None of the state’s other efforts to infringe on sovereignty have worked and there is no reason to believe this will work,” Oneida spokesman Mark Emery said. At the border, the Mohawk tribe warns of the economic impact of enforcing the new law. Tribal Council Chief James Ransom estimated hundreds of Native and non-Native peoples could be laid off. “It would be like General Motors closing,” said Ransom.

New York State has every right to collect taxes from its own citizens, as Gov. Paterson asserts, but it does not have the right or wherewithal to regulate the commerce of sovereign Indian nations.


This “new” approach, like others before it, has the corporate media on its side. Taxation of tobacco products across sovereign Indian borders has long frustrated state lawmakers, who often cite in the media so-called “lost” revenue. The numbers vary, but are always inflated to suit the public relations goals of any given day. Today the figure hovers around $60 million, a relatively tiny sum compared to the estimated $8 billion budget shortfall the state will face next fiscal year. Excessive spending and a dependence on Wall Street put New York in the red, not Indian people operating modest businesses on reservations. The state has lost nothing, since the money it is intent on collecting does not belong to the state in the first place. These are Indian monies, for tribal governments to collect or not collect, as per particular agreements with their own tribal businesses. As Indian Country Today has written here before, negotiation among sovereigns seeking to level trade imbalances is wholly legitimate and forges the only realistic path toward respectful resolution of differences.

Lastly, the false assertion that any amount of Indian revenue is owed to New York is rarely challenged and is even helped along by news items that report the “success” of tax tactics carried out by other states where Indian businesses exist. Here in New York reporting the “failure” of past governors to collect Indian taxes is a common theme in the media. The pressure has become ingrained in New York politics, always begging the question, who will succeed in finally getting that money? Paterson seems to believe he is on the right track. So, too, did others before him.