Why tax reform matters to Indian Country

As the debate over tax reform continues, it is not just an important issue for the United States and its economy.  It is also important to the 566 federally recognized sovereign Indian nations and tribes located within the United States.

Most people are aware of America's abysmal treatment of its indigenous peoples and the policies pursued for over 200 years that have produced generations of poverty and chronic economic underdevelopment.  Most are also aware that over the last 25 years, casino gaming has allowed some Indian tribes to generate moderate (and, in a few cases, significant) wealth that has done much to improve some tribes' economic conditions. 

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But despite these recent gains, nearly all Indian nations have never recovered from the 19th and 20th century policies that confiscated tribal lands, interfered with traditional economies, and crippled tribal governments in their ability to provide needed food, goods, and services for their own people.  Even now, the economic gains associated with gaming are under attack, with competition from state-licensed casinos and the Internet threatening the Indian gaming market. 

In addition, the handwriting is on the wall is that the federal government will not be expanding its treaty and trust responsibility to provide appropriations dollars in the near future.  Indeed, tribes are fighting vigorously right now just to get the government to make good on its commitment to fully fund federal contract support costs.

Tax reform is important to Indian Country because it presents an opportunity to fix some of the structural problems that cripple tribal economies and to create incentives to encourage investment on tribal lands.

There is very little in the current tax code that supports investment on tribal lands.  There is a small credit for wages paid for jobs created in Indian Country, as well as for accelerated depreciation of equipment that is associated with investment on tribal lands.  Neither of these provisions is permanent or reflective of policy consensus; the Senate Finance Committee has recommended their extension but Ways & Means Committee Chairman Dave Camp (R-Wis.) has proposed repeal.     

In addition, there are legal oddities that discriminate against tribal governments and undermine tribal investment opportunities.  For example, Indian tribal governments are not recognized as having the same authority as state and local governments to issue private activity bonds and must demonstrate that debt issuance is for an "essential government function." 

Another barrier is that the federal courts have allowed state and local governments to assess taxes on on-reservation business activities on racial grounds simply because customers and business partners on tribal lands are non-Indians.

If the U.S. government is not going to fully fund its financial obligations to Indian people, then Indian tribal governments must have back their freedom to repair the damage done by failed federal policies, create new jobs and tribal revenues, and take up the slack.  At a minimum, the United States should be a partner in this effort and provide bold, geographic based tax incentives to promote investment on tribal lands.

Prior to America’s destructive Indian policies, tribal lands were the ultimate “enterprise zones.”  With no taxes, no government regulation, and no trade barriers, tribes were able to achieve self-sustaining economies.  While that ideal is impossible in today’s interconnected economic world, there must be targeted efforts to encourage economic partnerships with potential investors and reduce federal, state, and local government interference with tribal development efforts. 

Both of us have had the responsibility of worrying about the economic future of our people.  As defenders of tribal sovereignty, we accept that primary responsibility for this challenge rests with tribal government.  But all fairness dictates that the federal government should do its part by supporting those efforts and changing the laws necessary to promote tribal economic development. 

Cagey is on the Lummi Nation Business Committee and a former Lummi tribal chairman and Porter is a senior counsel at Dentons in Washington D.C. and a former president of the Seneca Nation of Indians.