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Reborn NYS tax crisis is 10 years in the making

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ALBANY, N.Y. - As tension builds over a revived New York state attempt to tax reservation sales to non-Indians, the administration of Gov. George Pataki is still hiding the details of the last go-round, more than six years ago.

In 1997, Gov. Pataki abandoned efforts to sign tax compacts with the state's Indian nations after two tribal governments at opposite ends of the state stubbornly resisted his pressure and a wave of violent grass-roots protests closed interstate highways near reservations. Under pressure from the state legislature, the state is trying a new approach with tax regulations scheduled to go into effect Dec. 1.

But rather than attempting to learn the lessons of the previous episode, the state government is still keeping as much of it secret as it can. The Pataki Administration has refused repeated Freedom of Information requests, both from tribal governments and from Indian Country Today, for the tax compacts it negotiated with a number of tribal figures, some recognized government leaders and some not. Pataki officials even refuse to name the tribal members who signed the 1997 agreements, saying in a letter to ICT that lives of the Indian figures might be endangered by publication.

Leaders of the anti-tax protests scoff at this assertion, and the names of several signers are already widely circulated, but there is little doubt that the state's attempt to tax reservation economies has enflamed emotions among the Haudenosaunee (Iroquois) Confederacy and smaller state-recognized tribes for the better part of a decade.

The issue flares up frequently across Indian country, especially now that so many state budgets are running billion-dollar deficits. Arnold Schwarzenegger devoted a television commercial to the alleged Indian non-payment of taxes during his successful campaign in the California recall election. But the current round in New York state actually started with regulations written in the early 1990s and a lawsuit that went to the U.S. Supreme Court.

When the New York State Department of Taxation and Finance first issued its cigarette tax regulations, it had rough going in lower federal courts and even the New York Court of Appeals, the state's highest court. The federally licensed Indian trading firm Milhelm Attea & Bros. Inc. successfully brought suit arguing that the state's detailed regulations of wholesale cigarette deliveries were pre-empted by federal Indian Trader Statues. But when the case reached the U.S. Supreme Court, Justice John Paul Stevens overturned the challengers and upheld the state regulations.

In a June 1994 decision that, Stevens admitted, "undermined" previous precedents, he ruled that the state's interest in preventing cigarette tax evasion by non-Indians outweighed the burdens it imposed on federal Indian traders, or on tribal economies. (He limited the ruling, however, to the question of the Indian Trading Statutes and left aside issues in the regulations "that might affect tribal self government or federal authority over Indian affairs.")

Armed with the Attea decision, the Pataki Administration began to negotiate tax compacts with tribal governments or their alleged representatives. Some cooperated willingly. The Oneida Indian Nation, for one, said it was willing to reach an agreement in 1997 on achieving tax parity, when Gov. Pataki suddenly abandoned talks. Others reported substantial personal pressure from Pataki's chief negotiator Judith Hard. According to some critics, she reverted to the tactics of the 19th century land deals by signing at least one agreement with negotiators who were not legitimate tribal representatives. (Lingering ill-will against Hard resurfaced in 2002 when she emerged as a candidate for a U.S. Attorney's position. Whether or not tribal protests played a role, she was not appointed.)

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The texts of these compacts, and more importantly the names of the tribal leaders who signed them are still shrouded in state secrecy. According to Rowena General, a leader of the St. Regis Mohawk anti-tax protest and later spokesperson for its Tribal Council, incoming council members could not get a copy of the compact signed in their name even after filing a Freedom of Information request. Gov. Pataki's office turned down a similar request and subsequent appeal from ICT, saying that tribal leaders feared for their safety.

(The letter cited a fire at the home of Tuscarora Chief Leo Henry in April 1997. The origin of the fire was never determined.)

Whatever the means, however, by April 2, 1997 Gov. Pataki's office had issued a series of press releases announcing interim agreements with six tribal delegations. (A seventh was signed with unauthorized Mohawks from the St. Regis reservation, who were repudiated when they returned home, one who was manhandled by angry Mohawk women and symbolically driven to the reservation boundary.) The last holdouts were the Seneca Nation of Indians, then led by President Michael W. Schindler, and the Unkechaug (Poospatuck) Nation, a state recognized tribe on Long Island, whose chief Harry Wallace is an attorney well versed on tribal sovereignty.

Immediately after the April deadline, State Police began to impound gasoline shipments to the Seneca's Cattaraugus and Allegany reservations. In protest, Senecas began to set tires aflame on state highways, and on April 20 a violent clash with state troopers, injuring at least 12, closed the New York State Thruway in Irving overnight.

By April 22, said Schindler in an appeal for federal intervention to President Bill Clinton, more than 400 state troopers placed roadblocks around the Seneca reservations.

In May the protests spread to the Onondaga Reservation, where they amounted to an uprising against the traditionalist government led by Oren Lyons. On May 18, according to the Syracuse Post Standard, about 100 state police in full riot gear broke up a vigil by tax protestors along Interstate 81 where it passes the Onondaga territory near Nedrow. Photographs showed troopers swinging batons at protestors. The police arrested 24 individuals from several tribes.

At this point Gov. Pataki had enough. It's an open question whether he was swayed by the police violence, the growing resistance, disapproval of his measures by public opinion and Washington, or a state court decision by Judge Rose Sconier ruling that his seizures of gasoline tankers were illegal. But in a dramatic announcement on May 22, he declared that the state would abandon efforts to collect taxes on reservations, whether to tribal members or non-Indians, and that he recognized Indian sovereignty.

His decision and the protests, were vindicated in June 2000, when a state appeals court rejected a suit, New York State Association of Convenience Stores v. Tax Commissioner Michael Urbach, to compel Pataki to collect the sales taxes. Even though Attea had ruled that the state could promulgate its tax regulations, the Urbach decision said it didn't have to, if it had a "rational basis" to suspend the policy. And the state had good reason, said the judge, because "the statutes cannot effectively be enforced without the cooperation of the Indian tribes."