Klein applauds governor’s tax on Native American smokes

Governor David Paterson signed a bill Monday, December 15, designed to enforce a cigarette tax and curtail lucrative Native American business.

Senator Jeffrey Klein applauded Paterson’s decision last week and resurrected his own 2007 policy proposal. Anti-smoking advocates joined Klein in praise of the law, which some Native American retailers dismissed.

Under Article 20 of the New York Tax Law, cigarettes sold by Native American retailers to non-natives must be taxed.

But some Native-American New Yorkers claim exemption based on sovereign nation status. Rather than provoke the tribes, New York has looked the other way. Native-American retailers often sell cigarettes at a discount.

“This law has not been adequately applied for far too long, giving non-Indians easy access to tax-free cigarettes both on the reservations and over the Internet,” Paterson said.

“However, the signing of this bill should not be seen as anything other than enforcing the tax laws of New York in a fair and effective manner.”

When former governors George Pataki and Mario Cuomo attempted to enforce the cigarette tax, Native American groups set fire to tires and blocked highways in protest.

A Buffalo attorney representing the Seneca nation successfully filed an injunction against the Tax Law in 2005, determining the state’s failure to distribute tax-free cigarette coupons among Native Americans illegal. New York’s new law will hamstring cigarette wholesalers, prohibiting them from selling unstamped cigarettes to Article-20 violating retailers.

“I don’t think [the new law] is a good idea,” said Paul DiSilvio, who owns an Arthur Avenue cigar store.

“These guys screw up in government and take it out on hard-working people. There’s a reason why Indian reservations were given duty-free cigarettes. When I sold cigarettes [the untaxed sales] hurt my business. But these people are going to suffer.”

Klein favors an arrangement whereby New York and its tribal nations would split reservation cigarette tax revenues 50/50. In 2007, the senator introduced legislation to that effect.

“In the current economic climate, we as New Yorkers must adopt an attitude of burden sharing,” Klein said.

Tobacco Free Kids, a national anti-tobacco advocate, supports cigarette tax enforcement, TFK’s Eric Lindblom said.

Like Klein, TFK hopes New York and the tribes will engineer a tax revenue-splitting compact.

“It’s a good deal for the tribes,” Lindblom said. “They’re raising revenue. And it’s a good deal for the state.”

According to Lindblom, states like Washington and Arizona have reached such compacts already.

Klein has fought against untaxed tobacco sales for years. In 2000, he sponsored a law that banned the direct sale of cigarettes over the Internet to New York consumers.

It’s been only partially enforced; although former Attorney General Eliot Spitzer negotiated a national agreement with credit card issuers to refuse illegal transactions, cigarettes are routinely bought and sold over the Internet via check and money order.

According to a 2007 Klein report, the state lost $270 million in uncollected cigarette tax revenues from Native American businesses in 2004.

The report estimated that 50-70,000 New Yorkers would quiet smoking if they had to pay full price for cigarettes.

“If this law works like it’s supposed to work, it will significantly reduce tobacco use,” Lindblom said.

Councilman Oliver Koppell won a U.S. Supreme Court case against Native American retailers in 1994, when he was the state’s attorney general.

Over 70 percent of New Yorkers purchase untaxed cigarettes, Klein found.

Smoking kills 25,500 New Yorkers each year and costs the state $6 billion.

New York levies the country’s highest cigarette tax.

“I’m glad the governor is trying something new,” said Klein. “But enforcement is the key.”

Native America, Smoke, cigarettes

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