Little-noticed provisions in the proposed national tobacco settlement could reignite the combustible issue of sales taxes on cigarettes sold on Indian reservations.
The proposed $368 billion deal gives states great leeway in regulating tobacco sales -- which states such as New York could use to raise cigarette taxes and demand that tribes collect them.
"Taxation can become a regulatory tool," said Frank Ducheneaux, a lobbyist for Indian tribes who testified on the issue at a Senate hearing Wednesday.
While the tobacco deal negotiated by several state attorneys general and the tobacco companies is unlikely to be approved by Congress in whole, congressional sources say it could be the blueprint for the development of comprehensive anti-tobacco legislation next year.
For that reason, Native American rights advocates want to have their say on the deal now. Wednesday's hearing before the Senate Select Committee on Indian Affairs gave them that opportunity.
Witnesses and Native American advocates at the hearing said negotiators apparently tried to steer clear of the sales tax issue, which has been particularly controversial in New York State, where it prompted a shutdown of the state Thruway by members of the Seneca Nation of Indians last spring.
But negotiators may have stumbled into the sales tax issue by accident. The deal gives the states the authority to go beyond federal law to enact stricter regulations or taxes on cigarette sales, and witnesses at the hearing said that could turn out to be a direct threat to Indian retailers.
"The states could impose the state taxes on us," even though it is directly in conflict with the sovereignty of Indian nations, said Durrette Morris, a member of the Omaha Nation of Indians Tribal Council in Nebraska.
Ducheneaux said states could end up with even more control over Indian tribes because of another provision in the deal. That provision makes Indian tribes the licensing agents for tobacco retailers on reservations if the federal government says they're qualified to manage such programs -- but can give the states the licensing power if the tribes are deemed unqualified.
"There is absolutely no justification for the states to handle tribal licensing programs," said Mary Pavel, a Washington attorney representing several Indian tribes.
In addition to giving the states more leverage over the tribes, the deal's vague provisions regarding federal taxes also concern Indian leaders. Currently, federal excise taxes on tobacco are added at the time of manufacture and thus are already charged by the time cigarettes get to a reservation. But wording in the tobacco deal's appendix apparently allows the federal government to add another tax at the reservation.
"It would be precedent-setting to allow cigarettes to be taxed directly by the federal government at the reservation," said Alexander Tallchief Skibine, a law professor at the University of Utah.
New York state Attorney General Dennis C. Vacco, who helped negotiate the tobacco deal, refused to respond to a request for comment on the Indian tax issue. So did Rosemary Patterson, spokeswoman for the Seneca Nation.
The tax issue was just one of many concerns Native Americans brought before the Senate committee. Jack Chambers Jr., traditional elder of the Grand Traverse Band of Ottawa and Chippewa Indians in Michigan, said the deal makes no special provision for the fact that tobacco is a key element of tribal religious ceremonies.
"Tobacco is the first gift God gave to my people," Chambers said. "It is very sacred to my people."
But the committee's chairman, Sen. Ben Nighthorse Campbell, R-Colo, stressed that tobacco use is a huge problem among Native Americans. About 40 percent of Native Americans and 80 percent of American Indian teens smoke, "and I am deeply concerned about the health implications of those facts," Campbell said.