Tax proposal on cigarettes from reservations surprise to tribes

BOISE – Relationships between Idaho’s five recognized Indian tribes and the state are once again a focus at the 2011 Legislature, with Republican lawmakers starting a push to tax cigarettes sold on Indian reservations – over tribal objections.

House Speaker Lawerence Denney, R-Midvale, said Wednesday his bill will help prevent Idaho residents from traveling to reservations just to get a good deal, while leveling the playing field for off-reservation retailers that bear the full burden of the 57 cent-per-pack state tax. Currently, the Coeur d’Alene Tribe charges just a 10 cent tax per pack, while the Nez Perce Tribe near Lewiston charges 24 cents.

More than just a tax policy bill, however, Denney’s push yet again highlights how relationships between Idaho’s original residents and the largely white population that began migrating here in the early 19th century continue to produce powerful emotions – and suspicion among Indians that the dominant state government is still trying to exert unilateral influence over how their sovereign nations conduct their affairs.

“It’s sending us the wrong message, by dropping a bill without consulting us,” said Coeur d’Alene Tribal Chairman Chief Allan. “We seem to be taking a step backward again.”

The Idaho Indian Affairs Council, which includes legislators, tribal leaders and a representative of Gov. Butch Otter, coincidentally had a meeting scheduled just hours after Denney introduced his bill on Wednesday, and members were upset at Denney’s move.

Rep. Bob Nonini, R-Coeur d’Alene, council chairman, noted that the Coeur d’Alenes worked closely with state and local officials over the past two years as they proposed legislation on reservation law enforcement, a bill that narrowly failed in the House last week. “I think on an issue like this, the Legislature should give the tribes the same respect,” Nonini said.

The council voted unanimously to call on the House Revenue and Taxation Committee to hold off hearing Denney’s bill at least until March 7, to give tribal officials a chance to weigh in.

The cigarette tax bill would assess cigarettes at the wholesale level, before they’re sold to reservation retail outlets. Tribes then could get rebates from the state, but only up to the amount of their tribal cigarette tax – creating a powerful incentive for them to raise their tax to match the state’s.

Denney told House tax committee members Wednesday morning that the measure was drafted by the Idaho attorney general’s office specifically not to run afoul of U.S. Supreme Court rulings that protect tribal sovereignty.

However, Bill Roden, an attorney and lobbyist for the Coeur d’Alene Tribe, said, “What little I’ve seen of it, I think it is legally questionable.”

Denney insists it’s not an effort to boost Idaho tax revenue, but a push to make sure off-reservation retailers don’t face a disadvantage when state residents head to Indian country to stock up on cheap smokes. Denney does expect that the total number of cigarettes sold on Idaho Indian reservations – which was just over 324 million individual cigarettes in fiscal year 2010 – would decrease.

Not surprisingly, anti-smoking advocates who plan to introduce a measure later this session to hike Idaho’s cigarette tax by $1.25 per pack are looking favorably at Denney’s legislation, at least initially. Brent Olmstead, who lobbies for the Campaign for Tobacco-free Kids, said anything that increases the cost of cigarettes – from reservation retailers or those elsewhere – would likely be a disincentive for smokers.

What’s more, Denney’s measure could also undercut an argument that convenience stores are certain to employ in their fight against the anti-smoking coalition’s proposed $1.25 per pack hike: that such a move would drive more buyers onto Indian reservations, to take advantage of lower prices.

The leaders of tribes say Idaho should manage its tax and health care policy without encroaching onto Indians’ right to manage their own affairs.

Said Helo Hancock, the Coeur d’Alene Tribe’s legislative director, “It just sounds like another creative way to stick it to the tribes.”