Make Native American tribes collect tax on cigarettes

In two weeks, the New York State Legislature must adopt a budget and fill a $9 billion gap. As our legislators continue to face a fiscal crisis of historic proportions, wrangling with creative math, they are still failing to propose budget cuts substantial enough to close the budget gap. Sadly, the state is even considering borrowing more money, up to $2 billion in each of the next three years, rather than making the necessary spending reductions.

Given the size of the budget gap, wouldn’t you agree that we can no longer afford to look the other way when it comes to raising revenue for our state? Well, you may be surprised to learn that New York state has a history of turning the other cheek when it comes to collecting sales tax on cigarettes sold on Native American reservations. This failure has cost our state more than $1 billion in revenue each year.

By law, Native Americans can sell cigarettes tax-free to members of their reservations. This law was put in place after years of legal maneuvering that concluded that Native Americans have a right to sovereignty and paid their “fair share” when they lost most of their aboriginal lands hundreds of years ago.

However, no law or treaty states that cigarettes can be sold to people outside the reservation tax-free, yet the law is blatantly ignored as sales taxes continue to go uncollected.

According to a recent editorial in Crains New York, one-third of all cigarettes purchased in New York are sold tax-free at 180 different Indian outlets. The price disparity between cigarettes available there and at other retailers is astronomical. To put it in perspective, a carton of cigarettes is sold in New York City for around $100, whereas Native American-owned smoke shops can sell cartons for less than half that price.

Here on Long Island, the small Poospatuck Indian reservation in Mastic has 14 cigarette stores. In September, a federal court order barred five of these shops, which were sued by New York City, from selling cigarettes tax-free to those not affiliated with the reservation. The problem is that the remaining nine shops are still ignoring the law.