Paterson’s cigarette tax plan sends mixed messages

With the state facing a $7.4 billion deficit and pressure mounting from anti-Indian sovereignty legislators, Gov. David Paterson has instructed the state’s tax department to issue draft regulations on a law to force the collection of state sales taxes on marlboro tobacco products sold in Indian country.

At the same time, however, the governor said he would continue to negotiate a resolution with the nations.

Indian leaders responded swiftly, saying the governor was sending mixed messages and that they will continue to oppose any encroachment on their sovereignty.

Paterson announced the new scheme during his budget presentation Jan. 12. He said it is a matter of fairness to non-Indian stores who do charge the taxes, especially now that he has proposed adding $1 to the $2.75 excise tax per pack as of April 1.

Seneca Nation President Barry E. Snyder Sr. reminded state officials that the 1794 Canandaigua Treaty provides the Haudenosaunee nations the “free use and enjoyment” of their lands.

“This means that no other government has the right to interfere in how we use our lands without our consent. It is for this reason that New York state has no authority over us, our lands, or the commerce taking place on our lands. We have fought hard to recover from the dispossession of our traditional economy due to the loss of our lands over 200 years ago. We will not be the state’s tax collectors and we will defend our freedom regardless of the cost.”

J.C. Seneca, a Seneca Nation of Indians council member and tobacco wholesaler, dismissed the governor’s statements. “The governor is speaking out of both sides of his mouth.”

The law, which Paterson signed in December 2008, would prevent stamping agents from selling unstamped cigarettes to Indian retailers. Retailers would be forced to raise their prices, losing their competitive edge. They also would have to front to the state the taxes collected on untaxable sales to Indians.

Last January, a State Supreme Court justice slapped an injunction against the law’s implementation until the state’s tax and finance department devised a viable system to distribute tax exempt coupons for sales to tribal members.

The draft regulations that will be put out for public comment for six months will presumably include a viable coupon system.

A high level official in the administration, who asked not to be named, said the governor does not “embrace” the longstanding “forbearance policy” of not collecting taxes from Indian nations, but the current situation in which tax free cigarettes are sold on reservations will not change – for now.

“His announcement of the promulgation of these regulations in no way changes that tone and our desire to resolve these issues as amicably as possible respecting the sovereign rights and dealing in a government-to-government relationship over these next several months. But his desire to enforce the law is there and the way to get there is to put out these regulations and have some public comment and, meanwhile, continue negotiations and watch closely as litigation unfolds,” he said, referring to a number of current lawsuits involving the state’s perpetual attempt to force the nations to collect cigarette taxes.

Morgan Hook, a spokesman for the governor, said details about the proposed coupon system would be available in the draft regulations.

“The coupon system is a system we’re not necessarily in agreement with. But we don’t believe the nations should be tax collectors for the state. We understand how that would impose on their sovereignty,” Hook said.

He noted the proposed budget does not include any anticipated revenues from the new regulations. He also said the increased cigarette taxes are in line with the state’s overall goal of reducing cigarette smoking for health reasons.

The Oneida Indian Nation, said the governor’s proposal would mean more litigation.

“The state is facing a budgetary crisis and is again looking for Indian nations to become the state’s tax collector to solve that crisis. Attempting to impose New York state tax collection on the Oneida Nation and other Indian nations just means more costly litigation,” Oneida spokesman Mark Emery said in a statement.

He said Oneida continues to support government-to-government discussions as “the best way for Indian nations and states to solve the complex issues confronting them.”

The Paterson government is also floating the concept of “parity” – a system in which the nations would voluntarily price their cigarettes at around the same price as off reservation retailers.

“However, we’re not saying the money collected by the tribe has to come to the state of New York. What we’d like to see is some way for that price differential or the tax differential be dedicated to some sort of fund to be used for governmental purposes in services that are going to benefit the nations, but also surrounding communities – bridge projects, road projects. That concept hasn’t been outright rejected by some of the nations we’ve talked to,” the official said.

Seneca is one nation citizen who does outright reject it.

“We would never do that,” Seneca said. “Parity would just kill our businesses. And certainly we wouldn’t trust the state with regard to putting money in their hands that they would put back through the local community.”

Seneca said he stated his position at a meeting with Paterson’s staff on Jan. 27.

“I was very clear that we don’t trust them. History has taught us not to. Our ancestors fought hard to get us to where we are today as Indian people, as Seneca people. We’ll continue to fight for what we have, for our treaties to be honored and for our people’s right so they’ll be able to enjoy the same things we have for seven generations from today”

As a counterpart to the state’s six month comment period on its cigarette tax proposal, Seneca said he had considered proposing to the council a six-month comment period on whether the nation should allow traffic to go through Seneca territory on the New York Thruway. The nation withdrew the state’s right of way a few years ago.

“We started charging for every vehicle that travels across our territory. We use the thruway authority’s own figures. We started charging $1 and then it went up to $2 and now I’m proposing to the council to raise it to $3,” Seneca said.

According to the nation’s tally, the state now owes the Seneca Nation of Indians around $50 million. Bills are sent to the state periodically, but the state has not responded, Seneca said.

“We’re going to have to start charging interest.”


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