NCPA - National Center for Policy Analysis


November 23, 2004

The Indian Gaming Regulatory Act, which Congress passed in 1988, allowed the federal government to regulate gaming on Indian reservations. But critics say the law is vague and does not address the widespread effect of the lucrative Native American casino business on surrounding communities. In 1994, the Supreme Court ruled that states could collect taxes from sales to non-native customers. However, many states have not done so:

  • Native-American casinos in Oklahoma rake in $1.2 billion of revenue per year, costing the state $500 million per year in lost tax revenue (almost the amount of the state's 2003 budget shortfall).
  • New York's Oneida tribe used its casino revenues to purchase 16,000 acres of Oneida's local businesses (including gas stations and grocery stores), which has impacted the community through lost sales and property tax revenues.
  • The New York legislature ordered a reluctant Gov. Pataki to start collecting cigarette taxes from Native American tribes, which the state conservatively estimates at $330 million this year.

Connecticut is home to two of the most profitable casinos in the world and state law requires them to pay 25 percent of their revenue (about $400 million annually) to the state, but residents say the casinos breed crime, social problems and environmental degradation that is not worth the revenue.

Part of the reluctance in addressing flawed Indian sovereignty issues is politicians' fear of appearing politically incorrect. But many communities argue that sovereignty laws are outdated, and that special tax exemptions for Native Americans create monopolies that destroy non-tax exempt businesses and blight communities. In fact, citizens' groups have formed in some 22 states to pressure for changes in Indian sovereignty laws.

Source: Jan Golab, "The Festering Problem of Indian 'Sovereignty,'" American Enterprise Institute, September 2004


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