BUFFALO, N.Y. – A New York legislator has inserted himself into the judicial process over the state’s controversial plan to force American Indian businesses to collect state taxes on cigarettes they sell on sovereign Indian land to non-Indian customers.
State Sen. Carl Kruger has told the Hon. Richard J. Arcara, the presiding judge in a lawsuit filed by the Seneca Nation of Indians against Gov. David Paterson and other state officials, that “there is no issue of law” for him to decide in the case.
“New York state is facing a $200 million hole in its budget. The tax increase on cigarettes, along with the enforcement of the collection of these taxes was aimed to balance the budget,” Kruger told the federal judge.
The state’s total deficit is $9.2 billion.
“Nothing” – not even the checks-and-balances function of the judicial branch of the U.S. government – should “stand in its way,” Kruger said.
The Seneca Nation filed the lawsuit in U.S. District Court for the Western District of New York Aug. 17, challenging the legality of recent amendments to the state’s tax law and companion “emergency regulations” promulgated by the Department of Taxation and Finance that would force Indian tobacco businesses to collect cigarette taxes for the state by requiring all cigarettes sold to reservations to have “an affixed cigarette stamp.”
The lawsuit asks the court for declaratory judgments in the Seneca Nation’s favor in relation to seven violations: Violation of the sovereign right of self-government; violation of state tax immunity and the right to engage in tax-free commerce; the imposition of excessive burdens on Indian retailers; violation of the Constitution’s Indian Commerce Clause; violation of the Constitution’s Interstate Commerce Clause; pre-emption by the Internet Tax Freedom Act; and prepayment of tax to which New York is not entitled.
The state’s tax law was scheduled to go into effect Sept. 1, but a day earlier Arcara issued a temporary restraining order in the Seneca lawsuit, which was joined by the Cayuga Nation. The order, which is in place through Sept. 28, protects only those plaintiffs. Lawyers for the two tibes testified at hearings in front of Arcara on Sept. 14 and 15. A Seneca official testified that the state’s tax system would disrupt the tribe’s well-run internal cigarette regulatory structure, which imposes a 75-cent-per-carton fee and generates more than $13 million a year for things like reservation health and education services, according to the Associated Press.
Kruger, who has come under the scrutiny of the FBI in a campaign corruption probe, wrote to Arcara Sept. 2, telling the judge to back off.
“As chair of the Senate Finance Committee, I submit that there is no issue of law to decide in the (lawsuit). Issues regarding this matter was (sic) already adjudicated and decided favorable (sic) for New York State by the lower courts, by the Court of Appeals Second Circuit and by the U.S. Supreme Court,” Kruger wrote.
Kruger’s admission in his letter to Arcara that “the tax increase along with the enforcement of the collection of these taxes was aimed to balance the budget” contradicts the argument he has often put forward – and repeats in his letter – that Indians should pay their “fair share” of taxes.
“Taxes are part of life and must be equally applied without preferential treatment. It is imperative that New York State be allowed to obtain its funds to which it is legally entitled,” he wrote.
That position displays both a “profound ignorance of history” and a disregard for the nation’s treaties with the U.S. government, said a Seneca citizen, who asked not to be named.
“There is no ‘fair share’ entitlement by the state. The state is completely wrong on the issues considering federal treaty protections and guarantees in the 1794 Treaty of Canandaigua and the 1842 Treaty of Buffalo, which give us ‘free use and enjoyment’ of our lands,” the citizen said.
The 1842 Treaty of Buffalo says, in part, that the U.S. “will protect such lands of the Seneca Indians, within the State of New York, as may from time to time remain in their possession from all taxes, and assessments for roads, highways, or any other purpose.”
“It also smacks of hypocrisy for Kruger to say the Senecas should not get what he calls ‘preferential treatment,’ and then to see that he is under investigation for allegedly trading favors,” the citizen said.
