Stealing from the poor to give to the rich: why New York should abandon attempts to collect fuel taxes on reservations.

• Author: Tingley, Jonathon B.

1. INTRODUCTION

   Midsummer 1992 was a volatile period in New York State history. The State had attempted to impose and collect sales and excise taxes on fuel sold by Indian (1) reservation businesses to non-Indian buyers. (2) The tension that erupted between the Indians and the state government was reminiscent of the tension that existed centuries before. The tension, however, did not arise from the state government's conquest into Indian territory in a literal sense; rather, the conquest was one, according to the tribal leaders, of a sovereign nature. (3) Tribal leaders characterized the State's action as infringement on tribal sovereignty--breaching a longstanding treaty. (4)

   The tension that arose in the summer of 1992 was not mere passive dissent. Furious with the State's action, Indians burned tires and stockpiled other debris in major commercial thoroughfares that were critical to the economy of New York State, feeding such markets as Buffalo, Rochester, Syracuse, Albany, and to some extent, New York City. (5) The protest shut down a major section of the upstate portion of the New York State Thruway, Interstate 90. (6) Other protests, similar to the burning of tires in the Thruway, took place in New York's "southern tier," shutting down then-Route 17, currently Interstate 86. (7) These two highways are the only two major routes entering New York from the west. (8)

   The State's attempt to collect the taxes and the consequent shutdown of more than sixty miles of commercial roadways (9) did not only injure the upstate New York economy; state troopers, along with Indian protestors, were also injured. (10) Several protestors were arrested, and some claimed that state troopers used excessive force. (11)

   The protests eventually stopped, and New York has since refused to enforce the collection of sales and excise taxes. (12) But the potential exists for more violent protests, and the State's recent attempts to devise a method, using tax-exempt coupons, to collect the taxes have infuriated tribal nations. (13)

   This article will examine whether New York should impose and collect sales and excise taxes on fuel sold by reservation businesses to non-members. The answer to that question depends largely on whether and under what circumstances New York can impose any taxes on reservation businesses. The discussion should also be guided by the practical realities that result from taxation, for example, the economic effects. Accordingly, this article will analyze the current state of the law regarding state taxation of reservation activities and the potential consequences of further State attempts to collect taxes.

   Part II will examine reservations in New York. The population of Indians in New York, the geographic characteristics of reservations, and the economic realities of reservation life will all be explored. Part III will discuss a State's authority to impose taxes on Indians and non-Indians, on and off-reservation. Part III will focus on New York. Included will be a discussion of the relevant treaties and longstanding precedent. Part IV will examine New York's current taxing scheme and New York's recently failed attempt at reservation taxation. Part V will argue in favor of self-restraint on part of the New York legislature. The argument will be supported by an examination of the real economic consequences of inducing reliance on a policy of non-taxation and subsequent, abrupt imposition of unjust taxes on reservation activities. In Part VI, this article will conclude with a plea to New York voters to hold legislators responsible for failing to fulfill their duty to represent the best interests of the entire population, including reservation members.

2. RESERVATIONS IN NEW YORK

   1. Introduction

      New York State, exclusive of New York City, is home to more than 84,000 Indians, a large portion of which live on reservations. (14) While New York only embraces slightly more than one percent of the total tribes nationwide, (15) New York ranks sixth in Indian population. (16) Admittedly, some of those Indians are not "enrolled members" of any particular New York tribe, but the State does maintain a government-to-government relationship with nine Indian tribes. (17) Of the nine New York tribes, seven are federally recognized tribes, which entitles them to certain protections of the federal government. (18) Those seven tribes--the Seneca Nation, the Tonawanda Band of Seneca Indians, the Tuscarora Nation, the Oneida Nation, the Cayuga Nation, the St. Regis Band of Mohawk Indians, and the Onondaga Nation (19)--are all located in upstate New York. (20)

   2. Geographic Characteristics

      Nearly 88,000 acres within New York constitute reservation land. (21) The highest density of Indian land is in western New York. The Pickering Treaty of 1794 between the United States and the Seneca Nation of Indians reserved the two largest portions of land in New York for Indian use. (22) Those two reservations--the Allegany Reservation and the Cattaraugus Reservation--together consist of more than 50,000 acres. (23) The Allegany Reservation is located solely within Cattaraugus County, while the Cattaraugus Reservation is located in Cattaraugus, Chautauqua, and Erie Counties. (24) The majority of the voiced opposition against taxation resonates from those two reservations. (25)

      Another 7,500 acres is reserved for the Tonawanda Band of Seneca Indians in Niagara, Erie, and Genesee Counties. (26) Close in proximity and in size is the Tuscarora Reservation in Niagara County. (27) These four reservations lie in western New York.

      Moving eastward, the next reservation is located in Onondaga County. The Onondaga Reservation consists of 7,300 acres and is located just south of Syracuse. (28) Along the St. Lawrence River, in Franklin County, more than 14,000 acres constitute the St. Regis Mohawk Reservation. (29) Two state-recognized, but not federally recognized, reservations lie in Long Island--the Poospatuck Indian Reservation and the Shinnecock Indian Reservation in Suffolk County. (30)

   3. Economic Realities

      The economies of the reservations in upstate New York are, at best, suffering. Generally, reservation median income is substantially lower than the state or national median income. The median income in New York for full-time, year-round male workers as determined by the 2000 United States Census was over $40,000 per year. (31) On the Cattaraugus Reservation, where 89% of the population is American Indian (or a combination of American Indian and one or more races), the median income for full-time, year-round male workers barely broke $25,000 (32)--a difference of $15,000 per year.

      The low median income on reservations is the rule rather than the exception: five of the six reservations in New York exhibited a median income that fell short of the state median income. (33) The inclusion of New York City and its typically higher salaries in the data in determining the state median income does not alter the result to any significant extent. The national median income was similar to that of New York. (34)

      The reservations also suffer from a high unemployment rate. Nationally, the percentage of those in the labor force that were unemployed at the time of the 2000 Census was less than six percent. (35) The reservations in New York exhibited significantly higher percentages, with the Cattaraugus Reservation unemployment rate more than doubling the state-wide and national rates. (36)

      Significantly, the unemployment rates include only those people who are actually unemployed and who are seeking employment. (37) Those who are frustrated with the job market--and who therefore have forfeited their attempt to find employment, those who are unable to work due to illness or age, and those who simply choose not to work are not included in the computation of the unemployment rates. (38) Those included want to work, but are unable to find continuing employment. (39)

      A natural result of the low median income and the high unemployment rate is a high poverty rate. Indeed, the poverty rate of reservations in New York far surpasses the national poverty rate. Nationwide, those that fell below the poverty level constituted just over twelve percent of the population. (40) The numbers coming from New York reservations dwarfed the national poverty rate. (41) In some instances, the poverty rate was ten percentage points higher than the national rate, as in the cases of the Allegany, Cattaraugus, and St. Regis Mohawk reservations. (42)

      Just a brief visit to these reservations proves the point. New York reservations are economically depressed. Little income and few jobs are available. Small, Indian-owned businesses, such as gas stations, provide a large portion of what little income and few jobs are available. (43)

3. NEW YORK'S AUTHORITY TO IMPOSE TAXES

   Without the sustenance of taxation, the government would surely starve. (44) The general power to tax is not enumerated in the state constitution; (45) it is a power inherent in the existence of government. (46) However, federal law limits that power. As discussed below, those limitations are defined by nuances that pervade the area of state taxation on reservations.

   1. The Buffalo Creek Treaty of 1842

      The first federal limitation on a state's power to tax activities on reservations rests in the United States Constitution: the Supremacy Clause mandates that a duly ratified treaty prevails over any inconsistent laws. (47) In the context of Indian reservation taxation, the potential exists for that clause to play a role. Since the period immediately following this country's independence from England, the executive branch has entered into--and the Senate has ratified-close to four hundred treaties with Indian tribes. (48) Some of these have carved out particular areas of land for reservations, (49) some have required the westward removal of Indians to remote frontiers, (50) and some have clarified prior treaties. (51)

      In the...