2011-05-19 / This Week's Attitude

There Can Be No Reservations Concerning Cigarette Taxes

This Week’s Attitude
By Neil S. Friedman

In the course of American History, no one would ever challenge the fact that Native Americans have suffered terribly. The slaughter and unjust relocation of tens of millions of indigenous people, who had lived on their lands for thousands of years, was inhumane and shameful.

In spite of countless past injustices, it does not entitle Native Americans to defy current federal or local laws. Nonetheless, several New York State tribes have, for decades, avoided collecting and paying taxes on cigarettes sold on Indian reservations.

As cigarette prices have soared over the years, smokers seek cheaper alternatives and have purchased untaxed, often bootlegged, cigarettes from Indians. They are, in effect, dodging the law and New York is due the revenue.

Last year, the Albany legislature passed a law to require tribes to pay revenues for cigarettes sold to nontribal members on reservations. The regulation — which would add $4.35 to every pack of cigarettes — was supposed to take effect last September, but was sidelined when several tribes sued, claiming the law violated their sovereign rights, as they were not bound by the legislation. Consequently, a district court issued an injunction that New York’s attorney general battled to overturn.

Last week a federal appeals court — based on prior U.S. Supreme Court rulings — unanimously removed the nine-month-old restraining order and granted New York the right to collect the taxes, which some estimate could be from a half to a billion dollars annually. Four tribes and their advocates have vowed to contest this latest ruling as they continue to argue that no government — federal, state or local — has any right to set regulations for their territories.

Many politicians across the state applauded the decision, declaring that the state is entitled to the money, which would mean a surge in revenues to boost a debt-laden state treasury. Mayor Bloomberg remarked that some of the revenue could help New York City reduce losses trimmed from the state budget and avoid laying off thousands of teachers. New York’s Indians have disputed the state’s efforts to collect cigarette taxes for a long time. In 1992, when Governor Mario Cuomo tried to collect the revenue, a group of Senecas — the tribe credited with receiving the bulk of wholesale cigarette shipments — set fires along a stretch of the New York State Thruway near Buffalo. Five years later, Indians staged similar protests under Governor Pataki and even attacked state troopers who surrounded the Seneca reservation. Two years ago, Governor Paterson claimed the state would begin a campaign to end the widespread tax dodging, but the matter was never pursued.

In most cases, I advocate Native American rights because of this nation’s disgraceful record of violating hundreds of treaties that forced Indians to settle in unfamiliar regions that were, for the most part, unfavorable to their traditional lifestyles. Nonetheless, the cigarette tax issue has no correlation to treaty rights as it concerns transactions with non-Natives — not their rights to self-governing. Furthermore, the cigarettes are neither products manufactured by Native Americans nor purchased by them. Moreover, Indians freely avail themselves of some government services, so New York has the right to demand payment for the cigarette tax.

Cigarette brands manufactured by tobacco companies that have no ties to Native Americans should be taxed, regardless of where they are sold, and those revenues belong to the state. Pure and simple, it’s tax evasion.

If this issue became the norm, other businesses might devise plans to establish commerce on Indian lands nationwide to sell whatever they pleased without one cent of tax going back to Uncle Sam or state governments.

Smokers will continue to ignore the health risks associated with their habit as they seek cheaper options to feed their craving. Still, since the high price of cigarettes is primarily due to higher taxes, New York is entitled to the revenue on an estimated 30 million cartons of cigarettes sold on Indian reservations throughout the state.

Despite historical transgressions, there must be no reservations when it comes to Native Americans selling tax-free cigarettes to non-Indians.

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