Despite what our constitution says about the sacred status of treaty law, our own state government has been attempting to tax commerce on Native American reservations throughout New York State, in clear violation of preexisting treaties. The attempts have been entirely unsuccessful, however, in the case of the Senecas, who have met our state legislature with stiff resistance, citing five separate treaties in their defense.

The standoff between the Seneca Indians and the New York State Legislature was suspended on February 10^th, when the government indefinitely postponed its intention to collect taxes from Indian businesses. It’s a temporary victory for the Seneca Nation, which refused to become tax collectors for the state, an undertaking that would crush their retail economy. The issue is far from being resolved, however, because the forces aligned against the Indians are furious at the failure of democracy to work in their favor. Gasoline and cigarette wholesalers and retailers desperately want their slice of the pie back, the state legislature is having a conniption as tax revenues disappear, and the anti-smoking Nazis don’t care who they have to stand with to take away the destructive freedom of choice allowed in this country.

The Seneca Nation of Indians, along with other tribes, occupied New York State long before Europeans "discovered" the New World, of course, and their prehistory is rich in culture and tradition. The Natives were considered by whites to be an anachronism, and were dealt with through the only methods religious zealots of the 18th and 19th centuries understood: violence and paternalism. Confined to reservations, most of which have no exploitable natural resources or inherent economic benefits, the Indians were left to either languish and die or assimilate into American society. There were few alternatives for many years, until the day Indians realized they could sell gasoline and cigarettes on their land without paying any sales tax. An industry was born based on binding legal documents.

The Senecas have treaties with the United States that predate the U.S. Constitution. Article 9 of the Buffalo Creek Treaty of 1842 specifically states that Seneca land is free "...from all taxes and assessments for roads, highways, or any other purpose." In an 1857 ruling, the state legislature concluded it had no jurisdiction to impose sales taxes on the reservations in Allegheny and Cattaraugus counties, and went so far as to say that "No tax shall hereafter be assessed or imposed on either of said Indian reservations... for any purposes whatever..." Judicial and legislative rulings supported this view for the next 137 years, possibly because there really wasn’t anything worth taxing on reservations.

Smoking’s bad, mmmkay? It’s a killer of men, women, children, and pets, and is generally stupid and filthy. In New York State, smoking is worse than drunk driving, if you judge the evils of a product by its tax rate: the excise tax on beer is eleven cents per gallon, so it would take 242.1 six-packs to equal the fifteen dollar state tax on one carton of cigarettes. Talk about a party! It’s far cheaper to get drunk and run over strangers than it is to smoke yourself to death.

The basic argument of anti-smoking advocates, espoused by the state legislature, is that smoking increases the cost of health care, benefiting evil smokers at the expense of helpless children. Unfortunately, this heart-wrenching theory has little basis in fact. The number of smokers in this country has steadily declined since the negative health aspects of tobacco use were generally accepted. In 1965, 42% of the population smoked; in 1993, only 25% were smokers, and the numbers continues to decline. The freedom of choice to use cigarettes comes with certain consequences; smokers understand this and have been paying their own way for decades. A Rand Corporation study in 1995 comparing the cost of smokers on the health care system to what they pay, accounting for medical care and higher insurance premiums, as well as the decreased life expectancy of smokers (which lowers the cost of Social Security and Medicare) concluded that the sixty-one cents per dollar of health care a smoker pays is almost three times more than the twenty-one cents per dollar they actually cost the health care system.

The regressive tax on tobacco also targets the poor and minorities. When I say ‘regressive,’ I’m not expressing a political opinion. In tax terminology, a regressive tax (like sales tax) puts a higher relative burden on the poor, while a progressive tax (like income tax) is harder on the rich. Smokers tend to be blue-collar workers with less than a high school education, a demographic that includes a disproportionately high minority ratio. 50% of tobacco taxes are paid by people making less than $30 thousand a year, while those making over $60 thousand pay only 14%. In light of these figures, the tax on tobacco seems elitist and racist, but you won’t find Jesse Jackson or anyone else rushing to defend smokers’ rights.

There is also the impact of crime and violence to consider when discussing regressive taxes. A booming statewide black market for cigarettes exists today, especially in New York City, where the price of a single pack is eight dollars. Bootleggers make big money smuggling cigarettes into the state while the Bureau of Alcohol, Tobacco and Firearms has noted a marked rise in tobacco-related theft and crime. The danger to convenience store workers, truckers, and innocent bystanders in becoming victims of violent crime because of excessive tobacco taxation is at an all-time high in New York.

Raising the tax on cigarettes has not proven to be the giant windfall it was supposed to be. Smokers, sick of being gouged by the state, have taken their business to the reservations, the Internet and the black market. In the first four months after the recent tax hike on cigarettes in New York City, officials saw a 50% decline in the number of cartons sold. People didn’t quit smoking; they just quit buying cigarettes from legally taxed sources. Regressive ‘sin’ taxes in this country have a long history of creating underground markets where huge profits are made (think prohibition), and the illegal tobacco trade is predictably thriving in the wake of this nonsense.

In 1994, the US Supreme Court dealt a blow to Indian economies with their decision in The Department of Taxation and Finance of New York vs. Millhelm, Attea Brothers. The ruling established the precedent that Indian to non-Indian transactions on reservations could be subject to sales tax, but left the ultimate decision to individual states. With growing budget deficits and a powerful lobby stuffing money into their pockets, New York State legislators decided it was time to collect from prospering Indians. In April 1997, the situation came to a head when the Pataki administration impounded shipments of gasoline to Seneca Nation businesses in a move to force them to pay the sales tax. It only took a single tire-burning blockade on I-90 and a small riot with state troopers before Governor Pataki wisely backed down.

The legislature repealed its regulation in 1998, and courts ruled in 1999 that the state did not have the jurisdiction to tax Indian retailers. The New York Association of Convenience Stores (NYACS), which includes gasoline and tobacco wholesalers, was quite unhappy after spending all that money lobbying. So were anti-smoking advocates who, despite big tobacco companies having paid New York in excess of $3 billion since 1998 under the Master Settlement Agreement, wanted even higher cigarette taxes to force people to quit. The pressure from this oddball alliance and a budget deficit of $5.1 billion in 2003 made the revenue loss to the Indians too attractive a target to pass up. Last May, without any public hearing, the legislature once again mandated the collection of taxes on sales to non-Indians in the budget of 2003-04.

Having learned his lesson, Governor Pataki vetoed the proposal, calling it an "...assault on [Native American] sovereignty," but to no avail. The state legislature overrode him and passed the budget, including the projected revenues from reservations into their figures. A complicated coupon system was devised without any input from Indian retailers, and the plan was postponed from a December deadline to March while negotiations took place. Unlike other tribes, the Senecas vowed they would not accept the coupon system or any tax and threatened to withhold the $38 million their casino in Niagara Falls has generated for the state. Against this determined opposition, the Department of Taxation and Finance gave up, admitting they don’t have the power, authority, or the will to impose taxes on the Senecas.