MASTIC, N.Y. – The chief of the Unkechaug Indian Nation says allegations by the New York City mayor that “massive quantities” of illegal cigarettes are being sold at smokeshops on the tribe’s Poospatuck reservation are groundless and that the mayor is inappropriately inserting himself into the government-to-government relationship between tribes and the state.
In a double action Sept. 29, Mayor Michael Bloomberg criticized New York Gov. David A. Paterson for not enforcing cigarette tax laws, which the mayor claims deprives the city of $195 million a year in tax revenues. He also filed a federal lawsuit accusing eight shops on the reservation of allegedly breaking state and federal law by selling cigarettes in bulk to bootleggers who resell them in the city.
In a news release issued that day, Bloomberg claimed that the eight reservation businesses sold nearly 24 million cartons of “contraband” cigarettes since 2004 – an amount he claims would require each and every tribal member to smoke 19,200 cigarettes every day.
“I reject the proposition that shops here are selling these massive quantities of cigarettes,” said Harry Wallace, Unkechaug chief and an attorney.
Nation law limits retail sales of cigarettes to personal use.
“That’s a law of our nation and everyone licensed to do business here has to abide by that. Am I going to represent to you that we have 100 percent compliance? I don’t know if that is true, but if they violate that law, they jeopardize their standing with us.”
There are reasonable ways to prevent any violations of the tribe’s personal use law, he said, but that discussion will take place between the tribe and the state as two sovereign entities.
“We’re not going to engage in this discussion with the mayor of New York City. New York City is not the appropriate entity for us to have the conversation with. He’s imposing his own two cents into the equation where he does not belong.”
Cigarette sales to tribal members on reservations are not taxable. Legislators have been trying for years to force tribal smokeshops to collect taxes on cigarettes sold to non-Indians, but the tribes say that as sovereign nations they are not obligated to act as tax collectors for New York state.
According to state law, non-tribal members who buy cigarettes on reservations are obligated to report and pay the taxes on those purchases.
Bloomberg also railed against Paterson and demanded he take immediate action – including police action – against the tribes.
“The governor should go to the reservations and say, ‘As of tomorrow morning, stop this practice.’ And if it requires law enforcement, that’s what the governor has the state police for, to enforce the law.”
Paterson’s press secretary, Errol Cockfield, issued a conciliatory statement, sympathizing with the mayor’s “frustration” and expressing appreciation for the mayor’s efforts, and said Paterson is in “serious discussions” with the tribes “to try to reach a resolution to preclude the need for more endless litigation. It is important for the public to recognize that their governor will not take precipitous actions that could lead to regrettable consequences.”
Cockfield said the issue of cigarette tax collections on tribal lands complicates the tribal-state relationship and issues such as land into trust claims, property and gasoline tax collection, and the regulation of Indian casinos.
“The answer to these problems will not be found in a courtroom. Gov. Paterson is working to achieve an omnibus resolution to address all of these issues and maintain good relations with the nations – our neighbors – who live within New York’s borders.”
Wallace said he was encouraged by Paterson’s commitment to be guided by reasonable dialogue with the nations rather than “unnecessary lawsuits.”
Bloomberg claimed that tax losses from the eight Poospatuck businesses alone amount to $525 million in state taxes and up to $195 million for the city and that “fraudulent cigarette sales on Indian reservations” total tax losses of more than $1 billion a year to the state.
“I’m absolutely refuting those numbers,” Wallace said.
“It’s just numbers being thrown out there. When you look at the reality of the situation and the independent research that has been conducted on the issue, you realize it’s all false.”
Bloomberg’s numbers – and the source of untaxed cigarettes sold in the city – are refuted by the city’s Independent Budget Office (http://ibo.nyc.ny.us).
In an October 2007 report, IBO found that “71 percent [of city residents] reported buying from out-of-state vendors, which covers retailers in neighboring states as well as those in states further away, particularly those in the South with very low cigarette taxes.”
The report also noted that the government’s habit of putting higher taxes on cigarettes “also increases the incentives for buyers to seek low-tax or untaxed cigarettes.”
The mayor’s approach is one of collective punishment, Wallace asserted.
“I’m sure state licensees aren’t 100 percent compliant with their mandates. So the issue, then, is why do we have to assume the fault and responsibility for any individual or individuals who underskirts all aspects of any particular law? You should deal with those particular individuals, but that’s not what’s happening here. What’s happening here is if one individual does something alleged to be improper, let’s cut down the whole society.”
A case in point is Bloomberg’s citing of Rodney Morrison’s recent conviction on federal racketeering charges for cigarette trafficking. Bloomberg said Morrison is “the owner of the Peace Pipe Smoke Shop”; but he is neither a tribal member nor an Indian, and he doesn’t own the shop, Wallace said.
“No shop is licensed to a non-Indian. So whatever he did and whatever he is representing that he did, that’s on him, it’s not on us – and that’s the problem and the point of all of this.”
The shop is licensed to Morrison’s wife, Charlotte Morrison, who is a tribal member.
The lawsuit deliberately targets Unkechaug, Wallace said, “because they think we’re an easy target and they’ll try this and see what happens. I’m extremely upset. I don’t see him prosecuting Nassau County or any other community. He’s selectively prosecuting only our community.”
If the mayor gets away with collecting taxes from Unkechaug shops, it would set a precedent for the Indian tobacco industry in New York and across the country, he added.
