NY State Governor Patterson - part of budget - collect Indian cigarette taxes..

January 20, 2010 - Governor Paterson is taking on the American Indians in New York, moving to collect taxes on cigarettes sold within reservations to non-Indians. The move is sure to provoke a fight, and past attempts have led to a tremendous backlash, with the Seneca tribe shutting down a highway near Buffalo.

The move, announced Tuesday, January 19th as part of his executive budget, has been pushed by legislators and budget watchdogs as an easy source of revenue—State Senator Carl Kruger has said it could be $1 billion a year—that is due to New York. The Seneca have opposed it, saying that as a sovereign nation, the state does not have the right to collect such taxes.

This is a turn for the Paterson administration, which was resistant to legislators' calls to impose new rules on collecting the taxes. The governor's counsel, Peter Kiernan, said this of the taxes at a Senate committee in October: "While that remains an option, it is a one-dimensional choice that could have deleterious consequence that could include resistance, violence and retrenchment."

This is coupled with a proposed rise in cigarette taxes by $1 a pack, which, from a policy perspective, makes sense to clamp down on loopholes: The higher the taxes are on tobacco, the more people can be expected to drive to where there are no taxes, purchasing their cigarettes in bulk. Then again, it's unclear just how serious the administration is about the plan. The governor did not include revenue from the tax collections in his budget, saying that it would hold off until a six-month public comment period ends.

Budget director Robert Megna told reporters this was because the state was being conservative in its expectations and that "We expect that ongoing negotiations will take place" with the Indians.

Reference: Paterson Going After Indian Cigarette Taxes by Eliot Brown (ebrown@observer.com), The New York Observer, 1/19/2010.

A couple related news briefs:
NY State - Seneca Indians - lobbying against the PACT act..;
NY Governor signs bill to attempt to curb illegal sale of tax-free cigarettes to non-Indian purchasers..;