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Paterson wades into tobacco tax controversy

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Facing a more than $7 billion deficit, Governor Paterson is plumbing even long-shot revenue sources to make up the spending gap - things like the so-called "obesity tax" on soft drinks. Another is collecting tobacco taxes from the state's Indian Nations. Initial reaction from tribal chiefs suggests Albany shouldn't expect the money anytime soon. As David Sommerstein reports, Paterson has been reluctant to tread where past Governors have failed.

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David Sommerstein
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12 years ago, members of the Seneca Nation blockaded the New York State Thruway with burning tires.  They were protestingAlbany's latest effort to collect taxes on cigarettes sold at native-owned stores.  And they created an enduring symbol of the deep-seated resentment this issue conjures up.

Iroquois tribes - who lost much of their land to settlers in the 18th century - believe freedom from state taxation is part of their sovereign status.  They believe tt's also one of the few economic advantages they have.  They can charge much less for cigarettes.

The state legislature doesn't see it that way.  It passed a law in 2008 ordering tobacco wholesalers to only sell stamped cigarettes to native stores, essentially passing the tax on through the wholesalers.  Last fall, Senator Carl Kruger said it's only fair.

Anything short of that, anything short of that is denying the rule of law.  The very basic tenets for which this building stands on.

Remembering the image of the burning tires, Governor Paterson - and his predecessors - have been reluctant to enforce a law like that.  Here's Paterson last fall, too, responding to another Senator's demand to collect the taxes.

I will not shoot down your tobacco proposals again because they are already dead.

The estimates of the uncollected tobacco taxes vary widely, from a couple hundred million to one and a half billion dollars a year.  Now facing ever deeper debt, Governor Paterson did an about-face in his budget speech Tuesday.  He practically pleaded with the tribes.

This is no disrespect to the Indian Nations, but even when Nations are right next to each other, there must be a policy so that there can be an equality of opportunity for businesses in both regions.  And I offer to the Nations that we'll continue to negotiate with them as we have.  But our businesses are suffering and closing because of an unfair competition standard.

The St. Regis Mohawk Tribe has been mum so far on Paterson's entreaty.  The Oneida Nation brushed it off, saying it would just cause more litigation.

But the Seneca Nation, whose tobacco economy is orders of magnitude larger than the Mohawks, offered a harsh rebuke.

Tribal councellor J.C. Seneca told the Buffalo News he didn't think the Nation would ever sell tobacco products at the same price as off the reservation.  "They need to leave us alone," Seneca told the paper, "and let us do our business."

Seneca said the Nation was encouraged by the Governor's promise of negotiation.  But he was discouraged that Paterson, in the same budget speech, ordered his tax department to prepare a plan to collect the taxes in six months, no matter what.

Seneca's response?  Saying the Nation might spend six months determining whether to keep open the stretch of the Thruway that traverses the Seneca reservation.  "We're going to hunker down and dig in," he told the Buffalo News.  And without saying it, he alluded to the image of the burning tires, and with it, the future of Albany-Indian relations.

For North Country Public Radio, I'm David Sommerstein.

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