NY Indians Descend on NYC Cigarette Hearing

A vocal opponent adresses the crowd in the packed hearing room.

The New York State Senate hearing on the state’s non-collection of taxes on cigarettes sold to non-Native Americans on Indian Reservations brought representatives from Indian nations from all over New York State into a highly charged arena at the Borough of Manhattan Community College on Tuesday.

The hearing was chaired by state Sen. Craig Johnson (D-Port Washington) and had several other senators on the committee in attendance throughout the day. Though the hearing was scheduled to end at 2:30 p.m., the full slate of witnesses and complexity of the testimony being given extended to just after 4:30 p.m., with only two brief breaks in between.

Sen. Craig Johnson (D-Port Washington), chairman of the Senate Standing Committee on Investigations and Government Operations, will be leading the hearing at Manhattan Community College.

Johnson had to call for order on a couple of occasions during heated exchanges between Sen. Martin Golden (R-Brooklyn) and JC Seneca of the Seneca Nation of Indians that prompted mocking rebukes from Indians in the auditorium. Golden implored the Seneca nation to help New York State given the $4 billion budget deficit the state is facing claiming that New York State will soon be in the same position as California and issuing IOU’s to contractors, vendors and employees. This was met with calls from the crowd, many of whom were yelling out “That’s not our problem” and taunting the senator as he walked out midway through the proceedings.

Early on in the testimony, the senators attempted to establish the amount of tax money that New York was theoretically missing by not collecting tax on tobacco sales on Indian territories when sold to non-natives from off reservation land. This proved more difficult than the panel probably hoped as the first three witnesses gave figures that ranged between $95 million annually to $1.6 billion annually. The latter figure being given during spirited testimony given by Steve Rosenthal, a former tobacco distributor turned industry consultant.

The $95 million estimate was proffered by Peter Kiernan, representing Governor Paterson’s office, which represented a portion of the more than $200 million missing tax revenue as reported by William Comiskey, the deputy commission or Taxation and Finance. Kiernan said the reduced figure assumed a high level of “non-compliance in collection” of the tax even if a mechanism was adopted to collect taxes on cigarettes and it was agreed to by the tribes.
The committee pursued Kiernan more aggressively than other witnesses, clearly indicating a fracture between the governor’s office and the state legislature. Kiernan made it clear that the governor’s office is less than hopeful that this money will be collected and cited discussion with the New York State police that efforts to collect taxes from merchants on reservation territory would likely be met with violence. Key to this assumption were the incidents in 1992 and 1997 where New York State troopers attempting to enter Seneca territory upstate New York were met with angry mobs resulting in a standoff on both occasions.

Kiernan represented that the governor was determined to come to a resolution with the tribes but as of now has followed the practice of “forbearance,” which was begun during the Cuomo administration and continued through the Pataki and Spitzer administrations as well. Kiernan noted that the lack of clarity in the law and precedent to collect taxes from Indian nations as well as the likelihood of violent confrontation made the situation more difficult even though the Paterson administration believed it had a right to collect taxes from the tribes.

He went on to explain that the state troopers indicated during their discussions that the cost to close down activity on reservation lands in New York in an attempt to enforce taxation would cost nearly $2 million per day with no clear idea of how long a standoff between the state and the nations would take. Senators Golden and George Winner (R-Elmira) took the greatest exception to Kiernan’s testimony prompting Winner to ask “Doesn’t that send a message that there are rewards for not following the law?”

Other senators, most notably Sen. Ruben Diaz (D-Bronx) attempted to lay a foundation that Native Americans enjoy public resources from transportation to healthcare. But there was a noticeable shift in the room when JC Seneca of the Seneca Nation and Seneca counsel Rob Porter were sworn in and took their seats in the witness chairs in the front of the packed room. Johnson took an amicable and cautious approach with Seneca and Porter as the discussion turned toward the key issue of sovereignty. Seneca in turn spoke in measured tones about the definition of sovereignty and cited case law and a Federal treaty between the United States and the Seneca Nation establishing that all commerce conducted on reservation territory is exempt from all local, state and federal taxes.

The senate committee ran into a brick wall with the Seneca and Porter testimony. As counsel to the Seneca Nation, Porter quoted state and federal decisions with efficiency and closed down every angle the committee pursued to further its goal of taxing Indian nations. When Winner remarked that Mr. Seneca appeared to be a non-violent and peaceful person and suggested that conflict could be avoided, Seneca replied to the delight of the Native Americans in the room that “you obviously don’t know me very well.”

He went on to say that neither side wanted conflict but reminded the committee that it was New York State that “invaded Seneca land with a thousand state troopers” and asked what the committee would do if that happened on their land. At the end of the question and answer period, Seneca struck a conciliatory note that the Seneca Nation would continue to pursue all matters in a court of law and try to avoid violent confrontation.

In a brief interview after his testimony, Seneca was upbeat about the hearing saying that “dialogue is beneficial to both sides of our issues” and that he was very concerned for the “success of western New York.” He is one of the largest employers in its region, which has turned the economic tables in the past two decades.

Much of their success has been due to the revenues generated from three gaming operations controlled by the nation and the increased revenues from the sale of tobacco. Seneca Nation and Chief James Ransom, Chief of the St. Regis Mohawk tribe, provided economic reports as part of their testimonies to illustrate the economic benefit that the tribes activities have on the regions they border.

Left unclear is what role the committee will play and whether or not any recommendations they make can be enacted or enforced. As a result of the taxes on cigarettes in New York—and Manhattan in particular—all Indian tribes have seen an explosion in sales on reservation territory.

Part this economic boon to the tribes is a war chest of funds to fight any legal battles that they deem to be en encroachment on their sovereign rights to engage in commerce on their lands. What does seem clear is that New York will have to look elsewhere to close its ever increasing budget gap.