Do Native people pay taxes? Still, yes
Indian Country Today
The stereotypical tax question is asked so many times that a federal department dedicated to serving Native people and a reputable nonprofit organization that provides legal assistance to tribes have it listed in their “frequently asked questions.”
“Do Native people pay taxes?”
Short answer: Yes.
Long answer: Still, yes. Like all U.S. citizens, Native people pay federal income tax to the IRS on income they earn.
The question, or in some cases, accusation, that Native people are somehow tax-exempt is an old, tired myth that refuses to go away.
Taxes have been a trending news topic since reports surfaced recently that President Donald Trump paid just $750 in federal income taxes the year he ran for president, and paid no income taxes in many other years. Trump has repeatedly denied the report and said in Tuesday’s presidential debate that he’s paid millions of dollars, though he has yet to share documentation.
Basically, the report says Trump found a legal way to manipulate the tax system in his favor.
The Washington Post rounded up a list of expenses people posted on social media that cost more than what Trump apparently paid in taxes in 2016. Two days’ rent in Trump Tower, for example, costs around $750. The Post reported a comparable tax payment would most commonly be found among people making between $15,000 to $20,000 a year.
Native people also pay into payroll tax, a roughly 6 percent tax that comes out of every paycheck. Technically, it's a 12 percent tax, but employers are on the hook for half of it. This tax pays for Social Security, Medicare and unemployment insurance.
As part of a COVID-19 relief effort, Trump signed a memorandum in August that gives employers the option of not collecting the payroll tax from workers making less than about $104,000 annually, from Sept. 1 through the end of the year. However, those taxes don’t go away, and workers would pay them after the new year. Trump suggested, if reelected, he would push to have those taxes forgiven, though his presidential power only allows him to postpone, not waive it.
The Native American Rights Fund lists its answer to the question “Do Native people pay taxes?” with the following:
“All Indians are subject to federal income taxes. As sovereign entities, tribal governments have the power to levy taxes on reservation lands. Some tribes do, and some don’t. As a result, Indians and non-Indians may or may not pay sales taxes on goods and services purchased on the reservation, depending on the tribe. However, whenever a member of an Indian tribe conducts business off the reservation, that person, like everyone else, pays both state and local taxes. State income taxes are not paid on reservation or trust lands.”
Native American Rights Fund attorney Melody McCoy said the type of thinking that Natives don’t pay taxes is an “old mentality.” One of the areas McCoy specializes in is taxes in Indian Country.
“American Indians do pay federal income taxes and other kinds of federal taxes like excise taxes and whatnot. That’s definitely a general rule,” McCoy said.
Some tribes and individual Native people have argued in the courts or to the IRS against being obligated to pay federal income taxes. McCoy said she hasn’t seen any victories on the Native side.
The U.S. Interior Department Indian Affairs’ answer says Native people pay the “same taxes as other citizens” with some exceptions, which include:
- Federal income taxes are not levied on income from trust lands held for them by the U.S.
- State income taxes are not paid on income earned on a federal Indian reservation.
- State sales taxes are not paid by Indians on transactions made on a federal Indian reservation.
- Local property taxes are not paid on reservation or trust land.
Partnership with Native Americans, a nonprofit organization dedicated to providing resources to Native people, also explained the tax question on its website.
“Many people believe the U.S. government meets the needs of Native Americans through treaty benefits and entitlements,” reads the website. “They perceive Native Americans receive free housing, healthcare, education and food; government checks each month, and income without the burden of taxes. Reality is that federal treaty obligations are often unmet and almost always underfunded, and many Native families are struggling.”
Dalton Walker, Red Lake Anishinaabe, is a national correspondent at Indian Country Today. Follow him on Twitter: @daltonwalker Walker is based in Phoenix and enjoys Arizona winters.
Indian Country Today is a nonprofit news organization. Will you support our work? All of our content is free. There are no subscriptions or costs. And we have hired more Native journalists in the past year than any news organization ─ and with your help we will continue to grow and create career paths for our people. Support Indian Country Today for as little as $10.
The Associated Press contributed to this report.