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August 15, 2008

Senecas lobby as Paterson weighs cigarette tax

By MICHAEL GORMLEY

ALBANY, N.Y. (AP) — Days before the New York Legislature will try to stem growing budget deficits, leaders of the Seneca Nation pressed Gov. David Paterson's office to veto a bill that would require collecting millions of dollars in taxes on cigarettes now sold tax-free by tribes.

Nothing was resolved Thursday, said spokesmen for the tribe and Paterson.

Although Indians may sell goods to other Indians free of sales taxes, most Indian sales are to non-Indians. Tribes argue that treaties dating to the 19th century allow them to avoid state government sales taxes. But state officials going back to the 1980s have argued sales to non-Indians are taxable and the money should be collected.

In the balance hangs at least $400 million in annual revenue. On Tuesday, the Legislature will return to Albany at Paterson's call for an emergency economic session to deal with a proposal by the Democratic governor to cut $600 million in spending to help stave off a $6.4 billion deficit projected for the 2009-2010 fiscal year. New revenue, such as the cigarette tax collection, could head off at least some cuts that are strongly opposed by the powerful public worker unions and the Working Families Party.

"We continue to ask New York state to honor its treaties," said Richard Nephew, chairman of the Seneca Nation's Legislative Council. He said the taxes would cut into sales, which in turn would hurt the tribe's employment of 5,000 people and other economic benefits it spins off in western New York.

"The state still comes out ahead," said Seneca Counsel Robert Odawi Porter. "It just doesn't go into the Albany trough."

The tax bill, passed by the Senate and Assembly, has yet to be sent to Paterson. When it is, and that could happen Tuesday, the governor will have 10 days to sign or veto the measure.

The bill prohibits manufacturers from selling tobacco products without a state tax stamp to any wholesaler that doesn't certify the cigarettes won't be resold tax-free. Untaxed cigarettes could still be sold by Indians to Indians.

"Once it reaches his desk, we'll review it and solicit input from interested parties," said Paterson spokesman Errol Cockfield.

The issue may have been complicated on Wednesday. Assemblyman William Magee, a Madison County Democrat, introduced a potentially competing bill. It's billed as a simpler measure, one that would tax all cigarettes, then provide refunds to the tribe for sales to Indians. There is no Senate sponsor yet.

The Indian sales taxes have long been one of Albany's most difficult issues. Tribes held violent protests in 1995 when the state tried collect the tax on sovereign land. Conflict with state police briefly closed the Thruway, leaving some of it scorched by protesters burning tires.

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