The state needs to work with Indian tribes and not force them to collect sales taxes on cigarettes and gasoline, Gov. George E. Pataki said Monday in vetoing legislation to end the tax-free sales that have made many Indian retailers wealthy.
Health groups condemned the veto, charging Pataki's action will continue the rush by many smokers, but especially teenagers, to the cheaper tobacco products sold by Indian retailers.
Non-Indian business owners said it keeps intact the unlevel playing field that allows Indians to charge less per carton for cigarettes because of a tax avoidance system permitted by the Pataki administration.
The Legislature in June ordered -- again -- that Pataki's tax department begin collecting taxes at the wholesale level on tobacco and petroleum sold on Indian reservations to non-Indian consumers.
Lawmakers overwhelmingly back the state's collection efforts, upheld by a 1994 U.S. Supreme Court decision, as a way to end the price advantage Indian retailers enjoy over non-Indians who are forced to charge the $1.50 per pack state excise tax. They further claim the state is losing hundreds of millions of dollars a year in tax revenues to the Indian retailers.
But the governor, who recalls violent outbursts the last time the state tried to collect the taxes, said his administration would not move against the Indian tribes on the tax front. He said the legislation would have "devastating consequences on the state's relationship with Native Americans" and called it "an assault on tribal sovereignty."
Instead, Pataki said the state should concentrate on forging deals separately with Indian tribes for "price parity" arrangements in which tribal retailers would either artificially raise their prices or charge a tribal tax. He cited a deal over the weekend in which an Oklahoma-based tribe agreed not to sell cigarettes tax-free as part of a package that will give it a casino in the Catskills.
But critics note that the tribe, the Seneca-Cayuga Tribe of Oklahoma, has no cigarette or gasoline sales in the state, so that it was an easy negotiating item to give up in talks for a more lucrative casino.
Furthermore, the state's king of Indian cigarette sales, the Seneca Nation, has said it will never back such arrangements because of long-held treaty rights. Earlier this year, the new Seneca president, Barry Snyder Sr., said, "I can speak for 99 percent of Senecas: We will never sign any sort of tax agreement with the state."
Monday, Snyder said he applauded Pataki's veto.
"He did the right thing. He understands our treaty rights and sovereignty," Snyder said.
Pataki said there are still "incentives" for the Senecas to negotiate a cigarette and gasoline tax deal with the state, even though he already made a deal with the Senecas for casinos in Western New York that did not resolve the state's tax concerns. He would not elaborate.
The bill's author in the Assembly, Bill Magee, an Oneida Democrat, said he would urge his colleagues to override the veto. "This is a no-brainer, and it is absolutely something we must do," he said.
The Republican-led Senate, however, gave no clue what it might do on the issue.
Pataki in 1997 did try to collect the taxes, but that was met with violence, including the closing of the Thruway and clashes between Senecas and state troopers. He backed off the collection effort.
In 2003, the Legislature ordered Pataki's tax department to devise regulations to collect the taxes; the agency, whose head earlier this year recalled the 1997 clashes, balked and last month quietly let the regulations expire.
The legislation that Pataki vetoed Monday was more specific than the 2003 law in ordering a set date -- Jan. 1 -- for the taxes to be collected. Supporters say it gave Pataki less wiggle room to escape the issue.
"We really deplore the governor's lack of action," said Russell Sciandra, director of the Center for a Tobacco Free New York. He said 300,000 New Yorkers have died from smoking-related illnesses over the past 10 years since the issue has been brewing for the Pataki administration.
"If this had taken effect 10 years ago, as the U.S. Supreme Court said it could, some of those people would be alive," Sciandra said. "I don't know what you do when you have a governor who won't enforce the law."
"It's not the status quo. It's getting worse," said James Calvin, head of a trade group that represents convenience stores in New York. He said tobacco tax revenues for the state have fallen off even though the state raised its tax from $1.11 per pack to $1.50 several years ago, much of it attributed to tax-avoidance purchases by smokers.
"This means the governor is turning his back on tax fairness," Calvin said. "We're very disappointed and are hoping the Legislature will override this veto so some fairness will be brought to the taxation system in New York," added Steve Weingarten, a lobbyist for health groups and petroleum marketers.