Waging War by Taxation on Indian Country

Oliver J. Semans

Oh, what dangerous times we live in. In the days of our ancestors, it took the cavalry and then some to change our way of life. But now, because states across the country have lost many attempts to extinguish our sovereignty, they are trying a different tactic—and Big Tobacco and the ambiguous regulations of the Prevent All Cigarette Trafficking Act (PACT Act) are their spear points.

Make no mistake; this is not about cigarette taxes or cigarette sales. It’s about hacking away at our sovereignty until it’s gone, along with all the other things we’ve lost. Indian country is in grave danger. This issue should be presented as a priority in the White House Tribal Summit.

We all know that the courts say our businesses enjoy sovereign immunity both on our reservations—according to the U.S. Supreme Court in Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe of Oklahoma, a 1991 ruling—and off our reservations, as the Supreme Court decided in 1998 in Kiowa Tribe of Oklahoma v. Manufacturing Technologies. In the Ameriloan and Suthers cases, the courts ruled that states could not impose their laws on tribes.

The president has supported our sovereignty, saying among other things in a June 26, 2013 executive order that U.S. policy honors our treaties and recognizes “tribes' inherent sovereignty and right to self-government under U.S. law.” What does the United States want, according to President Obama’s order? “The development of prosperous and resilient tribal communities.”

Now that’s pretty cool, and I must admit President Obama has done a lot for Indian country. However, our sovereignty cannot be recognized by words and then destroyed by deeds.

That is where Big Tobacco comes in. Native tobacco represents around 2.6 percent of overall tobacco sales in the United States, and yet federal agencies, the states and Big Tobacco are targeting it.

Here’s how it happened. In the late 1990s, forty-six states took on Big Tobacco—including Phillip Morris (Altria), R. J. Reynolds, Brown & Williamson and Lorillard—by filing Medicaid lawsuits against the corporations for recovery of tobacco-related health-care costs.

In 1998, the states and Big Tobacco settled in what became known as the Master Settlement Agreement (MSA). The companies were exempted from private tort liability regarding harm caused by tobacco. Meanwhile, the states received up-front payments in the amount of $12.742 billion and were to receive over $206 billion over 25 years.

Of course, there was a catch…the money would not come from corporate profits but from consumers. The states agreed to slap a 2.2-cent cost increase (not a tax) on every cigarette, which amounts to .44 cents a pack or $4.40 per cartoon. Big Tobacco companies kept their profits, and consumers paid the bill. Hardly a bargain for consumers.

However, when the states tried to collect their annual MSA monies, Big Tobacco found a way to muddy the waters: “You are not collecting the MSA from the INDIANS,” the corporations said, “so, we will not pay you.” A three-judge arbitration panel ruled against Big Tobacco saying the failure to impose excise taxes on Indian reservation cigarette sales does not relax the tobacco companies’ financial obligations for their 2003 payment.

For the states, this was a handy opening to attack tribal sovereignty under the guise of the PACT Act, passed by Congress in 2010. Simultaneously, Big Tobacco got its chance to close down Native competitors.

Tribes from North and South Dakota, Nebraska, Wisconsin and Washington saw that state agencies were reaching out to their federal counterparts for help in doing this. Those tribes worked with their congressional delegations to force a meeting with the federal agencies in 2011. The tribes wanted to be a part of the development of a law that so directly targeted them and their sovereignty.

Federal officials were clever though. They simply refused the tribes’ request to provide regulations that would allow them to offer input under Section 5 (Protection of Tribal Sovereignty) of the PACT Act and President Obama’s June 26 executive order. I wonder which of those officials will be moving to a high-income job with Big Tobacco.

Without regulations, the ambiguity of the law allows federal agencies to attempt to force tribes to follow state laws and regulations instead of their own—a violation of tribal sovereignty. As a result, tribal employees have found themselves facing state and federal charges when they follow tribal law. Or perhaps they have shown up for work and found the business where they were employed shut down because it followed tribal, but not state, law. In Indian country, shipping companies such as UPS and FEDEX are now refusing to transport supplies because of threats by states. This is happening all over the country—even though the President says the United States supports “the development of prosperous and resilient tribal communities.”

I have always thought Indian country was a testing ground where corporations and governments could see whether violations of the United States Constitution could be used to increase profits. The Supreme Court’s 2010 Citizens United decision proved me right. Thanks to it, corporations can now buy elections to increase their political influence and thus their profits.

The Citizens United decision is part of many techniques in recent decades that have created the biggest gap between the middle class and rich in all of the United States’ history. Tactics like these in Indian country—isolating our economies, taking our resources, damaging our educational, food and health systems and more—have succeeded in producing the poorest of the poor.

To those of you outside of Indian country who think this doesn’t apply to you, I can tell you from experience, you’re next.

Tribes must unite to stop the current termination-through-taxation efforts by Big Tobacco and other corporations, who rely on an unholy alliance of state and federal agencies to put an end to our sovereignty. We must insist on being a part of developing regulations where they do not exist and protecting our sovereignty at all costs.

We owe it to our ancestors to protect the sovereignty they passed on to us. We are its stewards and must safeguard it for future generations.

Act now. Let your congressional delegates know we will not give up our sovereignty. We must demand a hearing before the Senate Indian Affairs Committee to ensure the protection of our sovereignty.

Oliver J. Semans is an enrolled member of the Rosebud Sioux Tribe and executive director of Four Directions.