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Economics of trust land ownership

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WINNEBAGO, Neb. - Economic development on many reservations is only a
dream, individuals can't find capital for investments in business - and
trust land is the culprit.

So says Lance Morgan, CEO of Ho-Chunk, Inc. He has floated an idea that
would have the federal government return all trust land to the tribes so
economic development can flourish on lands under tribal jurisdiction and
allow control of the land under the tribe's jurisdiction regardless of an
owner's race.

The return of trust land to tribal and individual ownership, he argues,
will allow Indian country to create wealth through land ownership.

"Land can live two different lives; [one is] physical, and the other is a
life of capital markets that can help to buy a tractor or a small
business," said Jonathan Taylor, research fellow with the Harvard Project
for American Indian Economic Development at the John F. Kennedy School of

"That's the system. Some businesses will fail, some will do very well; but
right now it doesn't matter how smart you are or how good your idea is.
What really matters is where you can get capital to get going, and that's
where the average Native American entrepreneur gives up. They can't get
past the little subsistence-type of entrepreneurship."

BIA loans are available for businesses, but there is no equity, no capital
resource. Land ownership will allow families to pass property down through
the family that would provide collateral for those who wish to start a
business or continue working the land. And fractionated heirship would

Not many American Indian families inherit land or property: they mostly
inherit fractionated land, Morgan said. "So, essentially over time the
assets we can leverage get smaller and smaller."

With permanent tribal jurisdiction and control of the land, the possibility
of developing infrastructure is greater. "The BIA doesn't care. Who should
care is the local government, but the tribal government doesn't have a
property tax base to properly do that," he said.

"The average city, county or state government has all kinds of powers in
its bag of tricks in order to do development for the greater good, but we
have lots of people who can stop development on reservations.

"It's not that we don't know what to do, it's that it doesn't even occur to
us that we can do that because of the trust land status," Morgan said.

"I think the lack of local taxes has huge implications in Indian country,
that's why the BIA does half the things they do for us. If you think about
it, the income from our businesses that we start and gaming operations
really just replaces taxes," Morgan said.

Years of opportunities have been missed because tribes can't tax their own
land. States have also taken taxing opportunities away from tribes.

"I'm in the cigarette business. I can buy a roll of stamps that costs five
dollars to make, yet the state charges me $30,000. So that's the taxation
business," Morgan said. "So we've missed out on that whole opportunity."

If trust land were given back to the tribes and dominant jurisdiction
established, the tribes could impose property and other taxes on
businesses, land, property whether owned by tribal members or not.

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He said that a strengthened jurisdiction by the tribes could bring all
parties together to settle disputes and that if trust lands were returned,
the Cobell lawsuit could be settled.

Because tribes were unable to control their own destiny with dominant
jurisdiction over the land, many became dependent on federal government
handouts, Morgan said.

"Some of us have gotten lucky and established businesses or run gaming
operations. That's just happenstance, a quirk of geography.

"That leaves huge portions of Native populations in rural areas that still
haven't had the opportunities that the average American citizen takes for
granted, largely because we don't have our own revenue resources," Morgan

"If an entity is completely dependent on the federal government for
handouts, [that entity is] almost doomed to not have enough; it's the
nature of that system."

It would not be imperative that tribes implement taxation should the trust
land be returned. It is a way to generate some revenue to deal with
infrastructure or other needs. With some tribes, taxation may be a local
political issue, but taxation could be imposed any way a tribe decides.

"If no tribe implemented a property tax we are still better off. We've
removed impediments to our economic growth. So it's not really about taxes,
just the next logical step in the chain," Morgan said.

If the trust land is returned to tribal control some mistakes will
undoubtedly occur, just as they did when tribal gaming first began.

"You don't hear that any more because we've evolved, we've learned to deal
with it and we've gotten more sophisticated. I think the same thing will
happen on the tribal taxation side," he said.

Dominant jurisdiction over the land could allow the tribes to disregard
race when collecting state taxes on motor fuel and cigarettes.

"[Reservations] are economic black holes. America is the richest country in
the world because we've developed a unique legal system and property is
based on legal and economic systems.

"The laws for that system are suspended for some reason on a reservation.
Lots of research on this subject shows that once you remove land from the
wealth equation, your economy starts going to hell," Morgan said. "Every
place they have liberalized the ownership of land the economies have
emerged fast and have done quite well."

Morgan cited Eastern Europe and Russia as examples of land held by the
government and systems that failed to create wealth.

"Indian country has far more in common with the planned economies of
eastern Europe than we do with the kind of anything goes, with some
regulation, economic model of the U.S.

"That strikes me as insane."