Cigarette Taxes and the Onondaga Nation

The NYS legislature is once again seeking to tax sales of cigarettes from the Onondaga and other Native American nations. While NOON certainly doesn't support cigarette smoking, we recognize the sovereign status of these nations and call on our government to live up to the agreements embodied in the Two Row Wampum (1613) and the Treaty of Canandaigua (1794). We call on Governor Paterson to meet with Onondaga Chiefs and representatives from the other Haudenosaunee Nations before taking any action.

Here are some relevant facts about this issue.

Taxation attempts are in violation of the Nation's sovereignty and its federal treaty rights. For instance, Article II of the 1794 Treaty of Canandaigua, guarantees the Onondagas the "free use and enjoyment" of their remaining Territory.

There is only one store owned by the Onondaga Nation that sells cigarettes, which are sold to walk-in customers, and not through the Internet. The store does not sell gasoline. The Onondaga Nation also does not operate any casinos, and therefore has no revenues from gambling.

All profits from this store go to the government of the Onondaga Nation, and fund dozens of programs that benefit the Onondaga people and their non-Native neighbors. Hundreds of Onondaga Nation citizens are employed through these programs, and they spend their wages outside the Nation territory, generating a ripple effect of tax generation in the surrounding communities.

Honoring the sovereignty and the Treaties and not taxing these sales should be seen as an economic stimulus package for the Central New York economy, very similar to the Empire Zones and the tax breaks enjoyed by other developers in Central New York.

The estimates of tax revenues generated by cigarette sales are grossly over-inflated by legislators who purport to represent the interests of convenience store owners. The State Tax Department puts the estimate at only $70 million.

There is a long and complex history of New York State attempting to tax cigarette sales on the Onondaga Nation. The Onondagas worked in 1996 and 1997 with the Pataki administration and reached an agreement to resolve this issue. Unfortunately, Governor Pataki did not follow through on the agreement.

Article: "Review of the History of the April 1997 Trade and Commerce Agreement Among the Traditional Haudenosaunee Councils of Chiefs and New York State, and the Impact Thereof on Haudenosaunee Sovereignty," by Joe Heath, Buffalo Law Review -- Link to Article

News Article: Governor pins hopes on diplomatic approach
By Tom Precious - BUFFALO NEWS ALBANY BUREAU
Updated: 08/21/08

Gov. David A. Paterson says he wants to negotiate.

ALBANY -- Gov. David A. Paterson insists the state has a legal right to collect taxes on Indian retailer cigarette sales but says he wants to negotiate with the tribes to end the years-long stalemate instead of trying to force an immediate halt to the tax-free sales.

In his most extensive remarks on a subject that has stymied a long line of governors before him, Paterson on Wednesday suggested that fear of violence by Native American protesters is driving part of his decision to take a slower route than the State Legislature is demanding.

"I would like to at least begin by going up and having a conversation. Now, if it's just, 'We do it because we feel like it, and there's nothing you can do about it, get out of here,' well, that might create a different reaction," Paterson said in an interview with The Buffalo News.

Native American leaders, who have been hearing a growing number of legislators and others pressing Paterson to collect the tax to help raise revenues to reduce the state's budget deficit, sounded relieved Tuesday evening.

"We wanted to thank the governor for his recognition and positive approach. We welcome the opportunity to meet with him on a nation-to-state basis in the near future," said Seneca President Maurice A. John Sr. Seneca retailers are the nation's top sellers of tax-free Indian cigarettes.

Advocates for collecting the tax, including lawmakers who say the uncollected revenues are needed to help the state through its fiscal challenges, say Paterson is making a mistake by trying to negotiate a solution -- a route previous governors have tried and failed.

"It's very hard for me to imagine why they would want to voluntarily give up a license to print money, which is what they have now," said Russell Sciandra, director of the Center for a Tobacco Free New York, one of numerous groups pushing Paterson to back legislation to begin collecting an estimated $400 million in annual tobacco taxes on Indian sales to non-Indians.

In the interview, Paterson said he wants to treat talks with Indian leaders "almost like international diplomacy." He said he wants to reach an "accommodation" with the tribes on the tax issue; he did not say precisely what that may entail.

Paterson offered warm words for the Indians. "I think that they feel that they are always labeled as the villains in this whole process, and maybe if they were treated or thought to be just like other businesses here and they started to feel like they're part of our state, even if they live on sacred land, that we might be able to reach an accommodation," the governor said.

Paterson recalled the confrontations between Indian protesters and former governors Mario M. Cuomo and George E. Pataki. In 1995, the Thruway was shut down during violent clashes between Indians and state troopers when Pataki tried to collect the tax. He immediately backed off the effort. Former Gov. Eliot L. Spitzer also talked tough on the topic but backed down and sought a conciliatory approach.

Paterson said he recognizes that other governors before him have failed on the issue.

Asked if fear of violence entered into his approach, he said, "I recognize that the threat must have been the reason that Gov. Pataki in his last 11 years never went back and never tried again, and Gov. Spitzer in his year in didn't go right in and try to do it as Gov. Pataki did in his first year. So, learning from my predecessors -- what I got from their approach was antagonist but distant. I would like to close that gap and talk to them about how we might work this out."

Legislation is heading Paterson's way to require wholesalers to attest that they only make legal sales to Indian retailers. Advocates say a new measure is needed that would require every cigarette in New York to be sold with a tax stamp affixed.

Paterson said he had not yet decided whether he will veto the measure given final approval two weeks ago on the collection front. "But I know that I believe I have the legal right to collect the taxes, so I don't need the bill to come to the conclusion that we have a legal right in this state to do that," he added.

With the state facing a $6.4 billion deficit next year and lawmakers just having completed a $600 million round of cutting to this year's finances, Paterson acknowledged that he would like the tobacco tax money from the Indian sales to non-Indians.

He also questioned wildly ranging estimates -- as high as $1.6 billion -- for what the tax collection effort would bring annually. He noted how Senate Majority Leader Dean Skelos called on him to collect the taxes as a way to avoid cuts to popular programs like education. He said some proponents of the tax collection use it as a "good political issue" and a "shill out" to avoid dealing with deeper budget problems.

tprecious@buffnews.com