The song was removed at Natalie Merchant’s behest, in the aftermath of the Salman Rushdie incident.
When Rushdie published his book “The Satanic Verses” in 1988, Ayatollah Ruhollah Khomein pronounced a death sentence on him.
When asked about the pronouncement, Cat Stevens (who had by then converted to Islam, and adopted the Muslim name of Yusuf Islam) remarked that the will of Ayatollah must always be respected. This comment was then placed out of context and/or edited, and soon people believed that Stevens did actually support the death sentence pronounced on Rushdie.
In the wake of this incident, “Peace Train” was removed from all American copies of “In My Tribe”. It is, however, found on international copies of the album (the one I have from Germany has it), and more recently it was included among the rarities featured on the compilation “Campfire Songs: The Popular, Obscure and Unknown Recordings” (2004).