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Untaxed Seneca Economy Brings Net Benefit to State

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ALLEGANY SENECA RESERVATION, N.Y. - Proposals to tax tobacco sales on the
Seneca reservation would kill over $100 million in wages and $400 million
in sales for a variety of New York state businesses, said a Washington,
D.C. consultant's study recently released by the Seneca Nation of Indians.

At the same time, the proposed tax would generate only $27.1 million for
the state budget, said the report from American Economics Group, Inc.

"This is perverse when the state routinely invests tax money to create
jobs," said the report.

"Here, it simply has to forego collecting the tax in order to protect jobs
and the economy in the Western part of the state."

The study is part of an ongoing Seneca public relations campaign against
the state legislature's directive to begin taxation of Indian tobacco and
convenience store sales to non-Indians. Although the legislature included
the order in passing the deficit state budget last year, Gov. George Pataki
has postponed putting it into effect.

Seneca Nation President Rickey Armstrong told Indian Country Today that the
tribal council decided to fight the tax by hiring a public relations
company, visiting editorial boards in key districts and even running
television commercials. He said that polls showed very strong support for
the Seneca position in Western New York.

Calling himself more of a diplomat than a "war chief" Armstrong said, "We
tried talking first with the state. It seemed to work a little bit. The
governor delayed implementing the tax."

Pataki's last attempt to sign tax compacts with tribal governments
collapsed in 1997 in the face of determined and sometimes violent
resistance sparked by the Senecas. Protestors on the Cattaraugus
Reservation closed Interstate 90, which it straddles, and clashed with
state police. When highway closings spread to the Onondaga Reservation near
Syracuse and were threatened by the state-recognized Unkechaug on Long
Island, Pataki abruptly changed course and in a major speech promised to
recognize Indian sovereignty and not tax reservation sales for Indian and
non-Indian alike.

The result has been an economic boom on reservations, even apart from the
influx of gaming dollars. The new study found that Seneca tobacco
businesses now directly employ 1,037 people. Retail stores employ another
54, it said.

Supplier industries added 1,081 indirect jobs, said the study. These nearly
2,200 jobs generated nearly $85 million in wages and benefits in 2003. When
these workers spent their paychecks, said the economists, they supported
more than 600 other jobs, paying nearly $19 million in wages.

These conclusions, said the consultants, a well known Washington research
group, came from "a mix of tried-and-true economic techniques."

Almost all of this activity would be lost, said the study, if the state
tried to tax it. "Only about 8.3 percent of current Seneca tobacco sales
would be converted to taxed cigarettes, if excise and sales taxes were
levied upon them" said the report. The yield in state and local taxes would
amount to only $27.1 million annually, it said. This is a far cry from the
State Legislature's estimate of $400 million, which the report called "a
number that has no basis in reality."

It said the idea that out-of-state purchasers would continue to buy Indian
cigarettes if the price included the high state excise was "a mistaken
belief."

The report included revealing details about the structure of the Seneca
tobacco industry, which accounts for a high percentage of cigarette sales
on the Internet. It said that Senecas sold about 155.1 million packs in
2003, and that 51.3 percent went out of state. But many of the in-state
sales were also over the Internet, said the study.

The American Economics Group located 55 Seneca firms in its survey.
(Another study by the General Accounting Office, an arm of the U.S.
Congress, found that most of these were located on the Cattaraugus
Reservation.) These firms sold $347.5 million in tobacco products in 2003.
But only four firms accounted for nearly 94 percent of the total.

Five more firms had individual sales between one and five million, and 36
more did under $250,000 a year.

Observed the study, "Senecas have demonstrated high ingenuity and
entrepreneurial skill in establishing businesses based on their unique
status within New York state's borders."