IRVING, N.Y. – A bill passed by the New York State legislature to force Indian businesses to collect state taxes on cigarettes sold on reservations violates treaty rights and won’t work, Indian leaders said.
Approved June 21 by 77-64 in the Assembly and 32-30 in the Senate, the bill requires all cigarettes sold on Indian reservations to have “an affixed cigarette stamp.” The state excise tax on cigarettes will increase from $2.75 a pack to $4.35 a pack, effective July 1. The intent is to capture state taxes on cigarettes sold to non-Indian consumers on reservation lands.
The state law is the second devastating blow to the robust Indian tobacco trade in two months. The federal PACT Act – Prevent All Cigarette Trafficking Act – which President Barack Obama signed in April, is due to be implemented by the end of June. It will prohibit the post office from delivering cigarettes sold on the Internet.
Nations can opt into a tax exemption coupon system for cigarettes sold to their members or be subject to a “prior approval system.” In both cases, the state determines the number of tax-exempt cigarettes an Indian nation citizen can smoke – roughly seven packs a month.
Gov. David Paterson, who proposed the bill, claims the measure will generate $440 million in revenue this year to help plug the state’s $9 billion budget shortfall.
Seneca Nation of Indians President Barry E. Snyder Sr. denounced the effort to collect tax on Native American tobacco sales as a direct attack on treaty rights.
“This is nothing less than a deliberate effort to sabotage our federal treaty rights and rape our economy to bail out New York State. Gov. Paterson and members of the State Legislature should be ashamed of themselves for looting our economy because they’ve squandered theirs through overspending and poor management. We are not a piggy bank the state can break open to grab extra cash. We are a sovereign nation protected by federal treaties and we will defend those treaties by whatever means necessary.”
The governor’s office did not return a call seeking comment.
Mark Emery, director of media relations for the Oneida Indian Nation, said attempts to place state taxes on Indian nations haven’t worked in the past and won’t work now.
“For that reason, creating an alternative pathway for the governor and the nation to negotiate new ways to resolve these longstanding issues between the state and Indian nations is a workable approach. The Oneida Nation looks forward to working with the state, and with any other party who shares Gov. Paterson’s commitment to working in good faith toward a resolution that reflects the true state of the law and the reality of the situation.”
Earlier this year, Paterson posted proposed cigarette tax regulations that would force New York licensed stamping agents to pay the taxes upfront, even though the law plainly states that “the ultimate incidence of and liability for the tax shall be upon the consumer.” The legislature ignored the overwhelming majority of public comments opposing the proposed regulations and passed the law.
“This is an act of war,” said J.C. Seneca, a Seneca Nation tribal councilor and tobacco businessman. “These efforts, these phantom dollars they’re saying are due from the commerce we have here on our territory – it’s just not going to happen. We’ve told them to honor our treaties, respect our sovereignty, and leave us alone. We’re not going to be tax collectors for New York state. There’s no way. They can pass all the legislation they want.”
The nation has made efforts to establish communication and dialogue with the governor and legislators to find ways to work together over this 25-year-old controversial issue that has been marked by confrontations and lawsuits, but to no avail, Seneca said.
“We don’t want to keep going down that same road, but the governor and the state have chosen that path.”
The nation’s lawyers are reviewing the new tax law with regard to litigation and considering all options, Seneca said.
One option may involve a section of the New York Thruway that passes through Seneca territory. Around three years ago the nation rescinded an agreement with New York state that allows traffic to pass free and began assessing a fee per car.
“The state owes the nation more than $58 million in fees,” he said.
Is the nation prepared for the same kind of physical confrontation that occurred over cigarette taxes in 1997 when then-Gov. George Pataki sent more than 150 heavily armed state troopers backed up by National Guard to block the nation’s territory and several people were beaten up by the police?
“I think right now it’s unpredictable what’s going to happen. We’ve done everything we can to avoid conflict, to try to be diplomatic and open the lines of communication, and educate the governor and legislature about what we have here as a sovereign nation,” Seneca said.
But the state’s actions are a throwback to the termination era, he added.
“We’re dealing with a governor who disregards the Native people in the state, disregards our treaty, disregards our sovereignty and then wants to institute termination once again against Indian people. It’s economic terrorism. This legislation sends a clear message that what they’re looking to do is terminate us economically as we try to provide jobs and a way of life for our people. Because that’s what will happen.”
If people lose their jobs, they’ll be forced off the land to find work.
“The state’s ultimate goal is to eliminate us and take our land,” Seneca said. “So we have to fight with everything we have to protect what we have and who we are, and we will. It’s unfortunate that we’re in this situation, but we will survive and we will succeed. We’re resilient.”