Lance Morgan: PACT Act a hidden power grab for states
The US Constitution has what is known as the Indian Commerce Clause. It basically states that Congress has the power to regulate commerce with Indian Tribes. Unfortunately, Congress just outsourced that power to the states.

On Thursday night, the US Senate passed what is known as the PACT Act, without even taking a vote. It was by unanimous consent. All Indian Country needed was one US Senator to object, but no one stepped up.

The PACT Act does several things. Mainly it prevents the post office from shipping Internet tobacco products, which for some tribes is big business. However, it does something else that isn’t so clear. It gives the states the power to enforce what is known as the Jenkins Act, a federal law, against tribal economic interests.

Giving the any state the power to enforce a federal law against a tribe is wrong and sends chills up my spine. To be blunt the states have proven over and over again that they can’t be trusted. Their greed always kicks in at some point and they use the law to rationalize it.

But the PACT Act is particularly tricky. There is a portion of the PACT Act that is intended to make tribes feel better. It clarifies that the new law doesn’t impact Tribal sovereignty. Well that is nice of them until you realize what game the states have been playing the last 20 years.

States rarely attack Tribes directly on economic issues because they largely can’t make us do anything. What they do is attempt to get their way indirectly by controlling those who deal with Tribes. “Don’t sell that to the tribe without state tax or we will take your license and throw you in jail” is surprisingly effective on non-Indians.

Interestingly, the US Supreme Court gave them idea in 1990’s when it made the helpful suggestion to states that they move the “legal incidence” of tax upstream economically to those who sell to tribes. This system was further endorsed in 2005, when the court ruled that the downstream economic effects of state tax laws on tribes don’t matter. The states have been using this playbook to isolate tribes economically ever since.

But the Tribes’ are not stupid! In the tobacco industry, the Tribes have been selling directly to each other in what is the modern day emergence of Tribe-to-Tribe commerce. When one tribe sell to another tribe, they are much more likely to ignore the state laws and their threats.

States hate the emergence of Tribe-to-Tribe commerce because it forces them to confront tribes who are acting under tribal law on tribal land. Enter the PACT Act. The Pact Act protects tribes, it says so right in the law. But it doesn’t protect those who sell to Tribes. In fact, it requires all sales to Tribes to be reported to the state and if it isn’t reported then the state can sue you in federal court for a felony violation of the Jenkins Act.

Just when you think it can’t get any worse, it does. The Tribes can’t win with this law. About 10 years ago most states entered into what is called the Master Settlement Agreement (“MSA”), with big tobacco companies. The states basically became partners with the tobacco companies by doubling the price and agreeing to split it amongst themselves. Tribes get nothing under this settlement, but the state is required to diligently enforce it against tribes or the Marlboro Man will withhold payments, which he is threatening to do right now if the states don’t crack down on Tribes.

The Jenkins Act is a simple law. All it really does is require you to notify the state if you ship tobacco products into that state. However, states have enacted a series of laws around the MSA and they plan to use the information required to be reported regarding tribal sales to no doubt sue those who sold to the tribes for MSA payments. The same MSA payments they won’t share with Tribes.

So basically, if you sell to a Tribe and don’t report you get sued. If you report your sales to the tribe, then you get sued under a different law. The only way you don’t sued is if you give the state an extra $4.50 per carton and even then the state can blacklist the native tobacco product and declare it contraband. This is especially helpful in protecting Marlboro’s market share, upon which the MSA payments are calculated.

This is so about money. It is about taking money away from us and protecting the state’s money and the Marlboro Man’s market share. Unfortunately, it is also a way to kill intertribal commerce and a way to continue the playbook of controlling tribes economically by threatening those who deal with Tribes.

I know I am right on this because if the PACT Act was serious about protecting Tribes, then it would have allowed tobacco sellers to report their sales directly to the Tribe, and not just to the state. This could have been done by simply adding the words “or Tribe” to the Jenkins Act. But the PACT ACT instead just requires that the feds and the states share their information with the Tribes, which is essentially a meaningless gesture because we will no longer have any tax income to protect now that the PACT Act is passed.

This PACT Act passed today, actually while I was writing this column. I was going to say contact your Senator, but not one of them stepped up to object. Dozens of tribes and several tribal organizations objected to this law and we couldn’t even get a hearing scheduled. In the world of Washington, DC we are reminded once of again of our worth. So it comes down to Obama. He is an adopted Crow and he says all the right things, but this is real and not the campaign trail. So it will be interesting to see how he reacts when the rhetoric is tested against the reality of supporting tribes. Maybe someone should start calling the White House!

Lance Morgan, CEO of Ho-Chunk, Inc. and Partner at Fredericks, Peebles & Morgan. He can be reached at

Prevent All Cigarette Trafficking Act.
H.R.1676 | S.1147

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