Pataki Smoke Screen?

New York governor seeks Indian sales tax delay

Published in CSP Daily News

ALBANY, N.Y. -- A state law that ends tax-free sales of cigarettes by Indian retailers to non-Indians would be delayed by a year under a proposal by New York Governor George Pataki.

Pataki's effort to delay enforcement of the law due to take effect March 1 comes as the governor seeks to raise the state's cigarette tax $1 to $2.50 a pack, the Associated Press reported.

After backing down from attempts to collect the taxes in the late 1990s amid outbreaks of tribal violence, Pataki has avoided a direct confrontation over the issue. [image-nocss] Instead, his administration has tried to negotiate settlements with tribes involving land claims, casinos and other issues in which the state seeks extra payments from tribes not collecting sales taxes.

In the past, the state Tax Department has simply let proposed regulations to collect the taxes die administratively rather than try to get the revenues.

"If we could get these changes I think we could work out compacts with the Indian nations and that's always been my goal; and I think it's a feasible goal though the legislation that was passed creates some barriers," Pataki said at a news conference Tuesday.

The Indian sales tax issue affects consumers and businesses in Cayuga County, where the Cayuga Indian Nation operates a convenience store in Union Springs.

A study released in November found more than a third of New York smokers regularly avoid the state's high cigarette taxes by buying from Indian reservations, the Internet or duty-free shops. It also concluded that such tax evasion has hampered the state's efforts to curb smoking.

Indian leaders lauded Pataki's cigarette proposals. Over the years the tax-free cigarette sales have become big business for Indian shops and Internet operations.

Non-Indian retail groups said Pataki is sending mixed messages by raising the tax but not doing more to reduce bootlegging and Indian tax-free sales.

Health groups also criticized the governor's delay, saying a failure to collect the tax will reduce the public health benefits of the tax increase.

Pataki refuted that, noting smoking rates continue to drop. A study released in October showed smoking among adults in New York state declined to an all-time low of 18.1% in 2004. Cigarette use among high school students in New York declined from 27.1% to 18.5% between 2000 to 2004. "It's a very positive thing and I have no doubt that this will further reduce the level of smoking in our state," Pataki said of the proposed cigarette tax.