UNION SPRINGS, N. Y. — With little fanfare but great emotion, the Cayuga Nation celebrated a turning point in its history April 29. It has just taken possession of its first land base in more than 200 years, four acres here including a gas station and convenience store. The service station is now doing business as a Cayuga Nation enterprise called Lakeside Trading.
Clint Halftown, tribal spokesman, explained that his people were tired of waiting for the settlement of its land claim of 64,027 acres in New York’s Finger Lakes region. Although a Federal District Court judge had awarded them a $247.9 million judgment, the case was now tied up in Appeals Court with no end in sight.
At the gas station, however, the most interesting number was on the gas pump. Regular gas was selling for $1.549 per gallon compared with $1.629 at the Nice N Easy Grocery Shoppe, the only other gas station in the village. The eight-cent a gallon differential was generating “really good” business, said Halftown. “It’s been steady.”
The tax differential is also intensifying a controversy affecting Indian businesses across the country. Just days after Lakeside Trading started pumping gas, State Senator Michael Nozzolio started pushing for a provision in the state budget bill requiring Indian businesses to collect sales taxes on sales to non-Indians.
The issue has simmered in New York since Gov. George Pataki responded to widespread Indian protests in 1997 by suspending attempts to collect state taxes on reservations. But Nozzolio expected his measure to speed through this year in the wake of the state budget crisis. If it passed, a clash would surely follow with tribal businesses throughout the state.
“We certainly will not be New York State tax collectors,” Halftown told Indian Country Today.
New York Indians from the Seneca of the Western Door to the state-recognized Unkechaug Poosepatucks of Long Island retain vivid memories of the tax protest of 1997, which culminated in blockades of interstate highways and sometimes violent clashes with state police. But the issue is coming to a head around the country.
As state governments struggle with budget deficits estimated to total $22 billion in this budget year and $54 billion in the next, legislators and taxmen are looking over the reservation border to the untaxed transactions in Indian country. Convenience store and gas station lobbying groups have never stopped complaining about what they consider an unfair advantage for the Rez. But fiscal pressure is also building on state legislatures to get their hands on the reservation economy, whether or not constitutional principles stand in the way.
The pressure is especially severe in states that have raised cigarette taxes to new heights, and found receipts dwindle as smokers turn to untaxed Indian outlets on reservation land or through the Internet.
Even apart from a drive in states like Wisconsin and California to siphon more funds from casino compacts, legislatures are advancing bills to require their taxmen to levy taxes on sales to non-Indians on the reservation. Some states like Montana have even attempted to collect revenue from Indian-owned businesses, but they so far have been firmly rebuffed by their own state supreme courts.
This drive for reservation levies puts states on a collision course with tribal leaders and Native entrepreneurs, who regard their own taxation powers as one of the most fundamental aspects of tribal sovereignty. Most would echo Halftown’s response to the Nozzolio bill, “We won’t collect them because we’re a sovereign nation.”
Neither this resistance nor discouraging court decisions has deterred the state revenue-seekers. In New York, even Gov. Pataki has apparently begun to back away from his 1997 public affirmation of tribal sovereignty. Published reports say that negotiations for a gaming compact with the St. Regis Mohawk tribe have been stalled by the governor’s insistence on payments for gas and cigarette sales on the St. Regis reservation, 200 miles north of the proposed casino. Tribal spokesperson Jennifer Jock said she couldn’t comment because the talks had reached an intense level, with on-going council meetings.
In Idaho, the House Revenue and Taxation Committee went through a reversal April 26 that shocked tribal lobbyists. After apparently killing a bill to mandate cigarette tax collections on reservations, the committee in a hastily convened second session passed a new version and sent it on to the House floor. In unconscious irony, the measure was attached to a bill giving a tax break to a large money-losing corporation.
(Idaho has an egregious record of illegal taxation of reservations. Just a year ago a federal judge blocked the legislature’s attempt to keep years of gasoline sales tax refunds that the Idaho Supreme Court ruled were owed to three tribes, which had been paying an unconstitutional levy. )
In Kansas last year, the state revenue department went as far as to confiscate gasoline delivery trucks and issue arrest warrants for leaders of the Winnebago Tribe in neighboring Iowa in an attempt to tax its fuel distribution company, before losing decisively in a federal court.
Some nations, including the Cayuga, have attempted to calm non-Indian competitors by a pricing policy that diverts most of the tax saving to the nation’s treasury.
“We could be thirty cents under,” Halftown said about the eight-cent differential.
The Oneida Indian Nation adopted a policy several years ago at its own enterprises by charging an Oneida Nation tax. Halftown acknowledged that he was following the Oneida pattern in the new venture. “Why re-invent the wheel?” he asked.
He said that the money saved on state taxes would go to the profit margin of the tribally-owned Lakeland Trading, which would be devoted to buying more land in the area. He noted that this strategy had enabled the Oneida to rebuild its land base from 32 acres to around 16,000.
The strategy of using tax breaks to encourage corporate growth is hardly new to American state and local government. “Enterprise Zones” offering a low-tax oasis were a key part of the “supply-side” economic policy advocated by Republicans like former vice-presidential candidate Jack Kemp. New York State even has its own version, called the Empire Zone. The growth of gasoline and convenience stores in the tax-free environment of Indian reservations could be considered a ringing affirmation of this policy.
Yet this economic success, coupled with land restoration, has become another complaint of opponents of tribal tax sovereignty. At a lunch counter across the street from Lakeland Trading, a local citizen named Walt Daggett complained to a reporter that its profits could pay for more Cayuga land purchases.
“The government better start changing these rights, or they’re going to own the whole country,” he said.