Osage Nation Principal Chief John Red Eagle vetoed two bills less than 24 hours before the ON Congress wrapped the 2011 Hun-Kah Session. Congress unsuccessfully voted to override one of the vetoes for a bill amending the Nation’s tax law, which some government officials contend gives a break to a single (on-reservation) smoke shop.
The April 15 veto override failed with a 5-7 vote.
During the April 8 session, Congress voted 9-3 to pass the tax law amendment bill (ONCA 11-33), which Chief Red Eagle objected to, as did the Osage Nation Tax Commission.
At issue is whether the additional tribal tax for cigarettes sold within 20 miles of Kansas should be struck. This tax section was added to the Nation’s tax law in an amendment bill (ONCA 09-01) passed by the First ON Congress in December 2008.
ONCA 11-33 is “An Act to provide a technical amendment to the (ON) Revenue and Taxation Act of 2006 . . .” The bill’s sponsor is Congressman Geoffrey Standing Bear, with Congressman Mark Simms as co-sponsor. If the bill would have passed, ONCA 11-33 would have repealed the “Border Tribal Tax” section of the revenue/ tax act.
The border tax section pertains to smoke shops licensed by the Nation within 20 miles of the Kansas state line. The border smoke shops are charged an additional tribal tax of $1.57 per carton of 10 packs of 20 cigarettes – on top of the minimum $1.50 in tribal tax charged for cigarettes in accordance with the current tobacco tax compact the Nation signed with the state of Oklahoma.
Although the Nation is required to collect a minimum tax rate of $1.50 per carton for cigarettes sold on the reservation, the tax rate set for Osage smoke shops is $5.15 per carton with the exemption of the casinos and two stores on the reservation borders, according to the Nation’s Tax Commission.
The border store, in question for this bill, pays the $1.50 minimum tax rate per carton plus the $1.57 additional border tax “to make the total tax more even” because the border stores pay 50 percent less in sales tax than the other stores, according to the Tax Commission. The second border smoke shop near Ponca City pays the minimum $1.50 per carton tax because it competes with the neighboring Kaw Nation, which does not have a signed tobacco tax compact.
In his April 14 executive veto message, Chief Red Eagle objected to ONCA 11-33’s passage because “it only affects one taxpayer according to a report from the (ON) Tax Commission. This special treatment or benefit to one taxpayer will cost the Nation over $100,000 annually in lost tax revenue, which is not in the best interest of the Nation.”
A letter from the Tax Commission was sent to Chief Red Eagle on April 11 in opposition of ONCA 11-33’s passage. The Tax Commission comprises: Beverly Brownfield (chairwoman); Milton Labadie (vice-chairman); Roy Goad Jr.; Teresa Rutherford; Richard Luttrell; and Mary Mashunkashey, who serves as the current tax administrator.
The smoke shop operator named during committee meetings discussing ONCA 11-33 is Roscoe Mays (Osage) who operates a smoke shop near Bartlesville. The Tax Commission contends Mays could receive up to $100,000 this year if the tax break takes effect and if he sells the same number of cigarette cartons he did in 2010.
“If this bill becomes law and Mr. Mays sells the same number of cartons this year, as in 2010, the (Nation’s) tax revenue will be reduced by $100,968. This is, in essence, taking $100,968 of the Nation’s annual income and giving it to one individual Osage,” stated the Tax Commission’s letter. “We are not trying to discourage free enterprise but feel that a share of the benefits of the Nation should belong to the Nation . . . It is not the position of the (Tax Commission) to adjust taxes based on the performance of any smoke shop. Profitability is to the discretion of the owner, the effectiveness of the management and the current market position. When have you ever known of a retailer getting a state tax break because they failed to compete in the marketplace?”
ONCA 11-33 initially passed with a 9-3 Congressional vote April 8. Voting “yes” were Congressmen Anthony Shackelford, Standing Bear, Simms, William “Kugee” Supernaw, Daniel Boone, John Free, Archie Mason, Eddy Red Eagle and Congresswoman Alice Goodfox. Congressman Raymond Red Corn, Congresswoman Shannon Edwards and Speaker Jerri Jean Branstetter voted “no.”
A motion was made to override the veto April 15 and discussion took place before the override vote.
Congressman Red Eagle, who voted for the override, said he believed there was poor communication when the current tobacco tax compact was negotiated. “If we override this veto, it leaves the door open for communication to revisit this compact . . . let’s pursue with the state a better compact.”
Simms said the $100,000 figure provided by the Tax Commission is “just a projection” . . . If the tobacco store closes “what impact will that be?”
“The fact remains this is going to benefit one smoke shop owner,” Red Corn said of the ONCA 11-33, which he opposed. In his April 10 email “Update,” Red Corn said: “The owner of the smoke shop, whose attorney argued a ‘fairness’ issue was at stake, already benefits from the second most favorable combined (state and tribal) tax rate among 11 smoke shops licensed in the Osage Nation. If this bill becomes law, it puts him at No. 1.”
Standing Bear noted the Nation has seen significant increases in its revenue thanks to gaming and said he believes the tribe should move away from taxing Osages. “I just don’t like the idea of taxing any of our people anymore and I’d like to find a way to make our license tags to where we just cover our expenses . . . This (bill) is one step, I hope, in lowering the tax burden on our own people.”
The override failed with “no” votes from Red Corn, Shackelford, Edwards, Free, Goodfox, Mason and Branstetter. Simms, Standing Bear, Supernaw, Boone and Red Eagle voted “yes” for the override.
Non-Osage tobacco retailers currently pay $10.31 per carton to the state in taxes, according to the Tax Commission.