NCPA - National Center for Policy Analysis

No Taxes for "Sovereign Nations"

January 13, 2004

Once a gambling enriched-tribe acquires land, the new "reservation" becomes a sovereign nation, exempt from all local and state laws, zoning ordinances, labor rules, environmental reviews, and American rules of due process and fair play in law enforcement, says Jan Golab. In addition, the "reservation" and business built on it, including a casino, has complete tax exemption. This policy erodes the local tax base and reduces government revenues.

Because of the numbers of casinos established in California, this poses a serious problem for the state's struggling economy:

  • In 2002, revenues from newly built casinos in California soared to $5 billion per year -- but the casinos paid virtually nothing to the state.
  • The Supreme Court has ruled that Indians must collect sales tax from customers who are not Indians, but nearly all tribal businesses ignore this rule, resulting in the undercutting of competing non-Indian businesses.
  • In Oklahoma, $580 million in annual sales and property taxes are lost to Indians in the state.
  • New York lost $895 million in 2002 by failing to collect taxes on cigarettes sold by Indians.

Because of the erosion of state and local tax base, Gov. Arnold Schwarzenegger has taken on the Indian gaming industry in California and is asking that they contribute 25 percent of their earnings to the state, or approximately $1 billion.

Source: Jan Golab, "Arnold Schwarzenegger Girds For Indian War," American Enterprise, January/February 2004, American Enterprise Institute.


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