Tribal General Welfare Exclusion Act: Landmark Legislation or Hollow Victory?


Much to-do has been made of the recent passage of the Tribal General Welfare Exclusion Act (TGWEA). No longer will it be acceptable for the Internal Revenue Service to expect taxes on benefits paid to tribal citizens, or to harass tribal governments by demanding to see their books in random audits and threatening them when they refuse to comply. There is no doubt that this is a good thing, but I do think it’s important to point out certain salient facts in order to put this into a broader context.

Some term the legislation is “a big tax break” for tribes. When I think of the concept of a tax break, I think of people or entities who are beholden to the IRS for what might be considered legitimate taxation (like individual income tax or corporate taxes), but who have been given some kind of loophole or advantage to legally avoid paying those taxes. However, the IRS was demanding taxes from revenues received from Indian trust lands and resources, which was unethical—if not illegal—to begin with. The TGWE Act was passed, in other words, to make the IRS stop doing something it shouldn’t have been doing to begin with. How can this be considered “a big tax break,” as though the IRS, the federal government, and Congress are doing Indian people some kind of favor?

Robert Odwai Porter pointed out in a recent column that the legislation was an example of strong tribal leadership, given the broad base of support for the legislation throughout Indian country, and this is true. He goes on, however, to laud Congress for working cooperatively across party lines “not just because the 113th Congress is likely to be the least productive and most partisan Congress in U.S. history,” but because it “was passed by both the House of Representatives and the Senate by unanimous votes, with neither house passing the bill in committee before it came to the floor for vote as with ordinary legislation.” 

The bill had virtually no opposition, and a long line of cosponsors signed on throughout the process. Why? Because everybody knew how egregious the IRS’s actions were. Backing the TGWEA was pretty much a no-brainer for any halfway-informed Member of Congress. In one fell swoop, Congress could be perceived as both bipartisan (who doesn’t hate the IRS, whether Democrat or Republican?), and pro-Indian—without it costing anybody any votes. There was nothing about the bill that was even remotely controversial.

The TGWEA was initially conceived of as just one strategy to combat the IRS’s bullying. Other strategies were proposed, generated from within Indian country. A consortium of tribal governments and organizations, including the Affiliated Tribes of Northwest Indians (ATNI) and United Southeast Tribes (USET), banded together in 2012 to consider their alternatives. It was recognized that the General Welfare Exclusion issue was only part of other larger challenges to tribal sovereignty, involving taxation. 

In January, 2013, the Center for World Indigenous Studies conducted a preliminary study on taxation disparities in Indian country. The study revealed that when the amount of money coming in to Indian country via treaty and trust-based federal funds was compared to the amounts leaving in the form of taxes paid at all governmental levels, there was only a slight net gain. In other words, the study concludes, American Indians are in effect paying for the federal government to live up to its trust responsibility.

The challenges posed by over-taxation are complex and many, if not obvious. The strategy originally proposed by tribes to address these threats to tribal sovereignty involved advocating for a system of tax compacting—negotiated agreements with the federal government on taxation policy, similar to the self-governance compacts that 40% of today’s tribal governments have. This approach would be more complex and likely take longer, but would also more comprehensively support the political autonomy of tribal governments by advancing an intergovernmental process. The result would in the long run increase political equality between tribal and federal governments.

The idea of petitioning Congress to sponsor a tribal General Welfare Exclusion act was proposed as an alternative to that process. It was a kind of shortcut that led to relatively quick results in order to get the IRS off the tribes’ backs—a political win/win for everyone, with little to no risk for anyone. It might have produced a positive short-term result, but what does Indian country gain in the long run by running to Congress to fix problems we can negotiate for ourselves? Doesn’t such an approach just reinforce Congress’s supposed plenary power over Indian affairs?

The IRS might be fended off for now, but the bigger problems still remain. The TGWEA does virtually nothing to change the taxation disparities in Indian country, which will in turn continue to perpetuate conditions of poverty for all but a handful of tribal communities.

Dina Gilio-Whitaker (Colville) is a freelance writer and research associate at the Center for World Indigenous Studies. She was educated at the University of New Mexico and holds a bachelor’s degree in Native American Studies and a master’s degree in American Studies. Follow her blog at