The truism that the U.S. Constitution itself points out the status of "Indians not taxed" is held up in Indian country as an early recognition that Native tribal nations were entities apart, with their own governance. Today, as sovereign entities, tribal governments must provide a variety of services to their members. Income from businesses on tribal territories is rightfully claimed as a part of that covenant and therefore not taxable by another government.
Now a federal judge in Idaho has added new weight to that Native sovereign assertion. Absent the fact that "Congress has not created a specific authorization for states to tax motor fuels sold on Indian reservations," wrote U.S. District Judge David O. Carter, "the state of Idaho does not have the right to tax the sale of gas in Indian country." In the 11-page decision, Carter emphasized that "only Congress has the power to regulate Indian commerce."
This major victory for three tribes ? the Coeur d'Alene Tribe, the Nez Perce Tribe and the Shoshone-Bannock Nation ? is clearly important for Indian sovereignty nationally. In this particular case, the decision disallows Idaho officials from enforcing a recent state law that authorized a 25-cent-per-gallon tax on gas sold on Indian lands. The three tribes had been forced to collect and remit the tax. The Aug. 16 decision represents one more tactical step in the long-running war between states and Indian nations over the intent by states to impose taxation on revenues from reservation businesses.
The states argue that they are losing tax dollars when Indian nations don't pay them taxes. This is a litany of counties and towns surrounding Indian reservations. But this is one of those "Big Lies" that become big and "believable" because of the constant restatement of its premise, but are nevertheless untrue. The reality is that these tax revenues resulting from Indian nations and other reservation enterprises are not for the states to lose, as they never belonged to the states. They rightfully belong within the jurisdiction of Native sovereignties, for the tribes or nations to pay for services on their own lands and to support their home communities. Again, this is a long-standing and increasingly important principle of Native tribal existence relative to the American legal system.
It is also true that when Indians rightfully are not required to pay such taxes, the result is not "tax exemption" granted by the state. The Native sovereignty simply represents another equal base of taxation power and authority. These are sovereign held powers that Indian nations understand but are not always capable of defending adequately. Many states do not understand this principle of U.S. federal Indian relations; some chose completely to disregard it. The right to tax and/or not be taxed is fundamental to understanding Indian sovereignty. A great deal of education on the issue is still called for, inside and outside of Indian country.
Idaho has been one of those states that refuse to respect Indian sovereignty in the pursuit of state revenues. For years, it forced the collection of millions of Indian dollars under a tax that was struck down by the Idaho Supreme Court in June 2001. The state appealed but the U.S. Supreme Court would not hear the case. This spring, the Republican-led Idaho legislature, against legal advice that called it unconstitutional, reinstated the tax, even making it retroactive to 1996. Substantial revenues needed by the tribes to provide membership services ($22 million reportedly just for the Shoshone-Bannock) has thus been taken by the state. (The money is still held in an escrow account pending a possible new appeal by Idaho.) However, it is undeniable that the recent decision has knocked back the mostly Republican anti-Indian sovereignty forces in Idaho. It will help elsewhere.
In New York State, the notion of taxing the Native nations, fiercely resisted by the reservations, nevertheless continues to emerge, always at the county and municipal levels and in campaign speeches. State Comptroller Carl McCall, running for the Democratic nomination for governor, made noises in that direction recently, calling for such "taxation" on enterprises of New York Native nations. McCall's memory is not elephantine. Current governor George Pataki tried that route in 1996-1997 and learned painfully that it is not a good idea. To his credit, Pataki in time realized that there is enough capable business leadership and talent in the tribal structures so that mutually beneficial economic agreements are possible. He has become a supporter of Indian jurisdictions. Not long ago another court forced Kansas to back off its arrest-and-confiscate policy attempting to tax Indian-to-Indian cross-border trade. We encourage all tribes/nations to resist the contradictory imposition of state taxation. Understandably, numerous nations develop granting programs to neighboring towns and counties for school systems and other non-tribal services. This is good policy as tribal nations offer to be part of a wider community, but it is not based on a legal obligation.
Sovereignty, within a context of mutual collaboration with other governments, is the fundamental strategy of Indian political and economic prosperity. Given an opportunity, not often realized within Idaho, New York or any state's history, even long-term and costly antagonisms have started to give way to mutual gains achieved through the language of business and community building. Working together from an equal footing, it can become more understood that both tribal and state interests can be better realized in unison rather than division.