‘Threat assessment’ sought in Indian tax dispute

Gov. David A. Paterson has asked the U.S. Justice Department for a “threat assessment” about possible violence if he were to try to collect taxes on cigarette sales by Indian tribes, including the Seneca Nation.

In a letter to top federal prosecutors, the governor also suggests he might need help from Washington in dealing with any unrest by Indian tribes.

The unusual request, dated Sept. 23 and sent to the U.S. attorneys in the state, including Buffalo, seeks the federal government’s assistance to determine the “likelihood of violence and civil unrest” if he began enforcing the collection of state taxes on cigarette sales.

“Furthermore, I would appreciate your operational commitment to help mitigate any disturbances that might occur in each of your districts if implementation were to occur,” Paterson wrote, without elaborating, to U.S. Attorneys Kathleen Mehltretter of the Western District of New York, Andrew Baxter in Syracuse and Benton Campbell in Brooklyn. Mehltretter could not be reached Tuesday to comment.

Sources said that Paterson’s office had told the Seneca Nation about the letter last month. Word about it began circulating a day after a combative meeting in Albany at which Seneca representatives threatened the political careers of three state senators. The Seneca representatives, according to those in the meeting, said they would raise $500,000 to help defeat the lawmakers, including Sen. William T. Stachowski, D-Lake View, for trying to end the tax-free cigarette sales.

On the surface, the governor’s letter might indicate an interest in ending the long-standing stalemate.

But sources in the Capitol privately suggested Paterson might be looking for cover from the federal government — through a finding of possible widespread violence, for instance — for not pursuing collection of the taxes.

The governor, in fact, said his “intent” was to continue trying to negotiate agreements with the tribes over their refusal to collect taxes on millions of winston cigarettes sold tax-free each year in smoke shops, through the mail and over the Internet.

But some legislators have been intensifying pressure on Paterson to begin collecting the tax, which, they say, could bring the state an additional $1 billion a year in revenue as they desperately look for ways to slash a $3 billion deficit without resorting to controversial spending cuts.

The State Senate plans to hold hearings next week on the uncollected sales taxes.

Paterson begins his letter by asking the top federal prosecutors for “your guidance as to the potential consequences” if the state were to begin collecting the tax. The U.S. Supreme Court ruled in 1994 that the state had the legal right to collect taxes on cigarettes online buy sold on reservations to non-Indians.

The governor noted past disturbances, including battles in 1997 along the Thruway when then-Gov. George E. Pataki tried to collect the taxes. “As a result of such unrest, a policy of forbearance was put in place” by the state Department of Taxation and Finance, he wrote.

Since the administration of Mario M. Cuomo, governors have avoided the tax dispute. The issue has intensified as, over the years, the state sharply raised tobacco excise taxes, giving Indian retailers a major advantage over competitors and drawing complaints from non- Indian retailers. Health groups, meanwhile, have maintained that state inaction has undermined the use of higher taxes to dampen consumption.

The state now imposes an excise tax of $2.75 per pack of cigarettes, while New York City, where cigarette bootlegging has exploded, tacks an additional $1.50 per pack. Many Indian retailers sell lower-priced brands for several dollars less than the $27.50 per carton charged by non-Indian retailers.

The governor’s office declined to answer any questions, with Morgan Hook, a Paterson spokesman, saying, “We’re going to let the letter speak for itself.”

Officials with the Seneca Nation, which accounts for the largest sales of tax-free cigarettes by Indian retailers, appeared to downplay the Paterson letter.

“We see the letter as nothing more than the governor doing his job to assess the historic consequences of what happens when the state tries to violate our treaty rights,” said Richard Nephew, chairman of the Seneca Nation Council.

“A strong reaction to further affronts on tribal sovereignty is inevitable,” said Mark Emery, a spokesman for the Oneida Indian Nation, which recently purchased a cigarette-manufacturing facility in Erie County. “We cannot control what individuals may choose to do. These concerns will not arise, however, if the state deals with Indian nations on a government-to-government basis.”

But a legislator who for years has called for collecting taxes on cigarette sales by Indians described Paterson’s inquiry as “an important first step.”

“With these tough fiscal times, it becomes even more important that we uphold the law,” said State Sen. Jeffrey D. Klein, a Bronx Democrat and deputy majority leader of the State Senate.

“It’s money we certainly need now,” he added.

With Stachowski and State Sen. Craig M. Johnson, a Democrat from Port Washington in Nassau County, Klein met with Seneca representatives Monday in his Albany office. Sources called the meeting confrontational. “It got a little combative,” Klein agreed.

The Senecas, Klein said, raised eyebrows by saying the tribe’s council recently had voted to raise $500,000 for campaign donations to opponents of the three lawmakers.

An infuriated Klein called that a threat, which he described as unhelpful in resolving the stalemate. “What was the point of that?” he asked. “How do you have a fruitful conversation if the only thing they know is threats?”

“We’re not looking to hurt the Native American tribes, but this is a legitimate tax issue. You can’t continue to evade New York’s cigarette tax laws,” he added.

Seneca officials declined to comment on Klein’s claim of a political threat.

Stachowski could not be reached to comment.

James Calvin, head of the New York State Association of Convenience Stores, said he had not heard about the Paterson letter. “It sounds intriguing. Whether it portends any action remains to be seen. But we remain hopeful that the administration is preparing to collect those taxes as a way to close the budget gap this year and beyond,” he said.

Calvin added that, unlike in 1997, the state has a law put on the books after the 2001 terrorist attacks making it a felony for acts done to “intimidate the government or coerce a civilian population.”

“The state now has a tool for addressing any violence or threats of violence,” he said.

“The state now has a tool for addressing any violence or threats of violence,” he said.

source: www.buffalonews.com

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