Coverage of state budget crises like the New York Times editorial, "The Looming Crisis in the States" should serve as a warning to Indian Country. Observing that "[t]he most immediate cause of the states’ problems is the decline in tax revenue caused by the downturn," and citing a 10% decrease in state sales, personal and corporate taxes over the past two years, the Times recommends state tax increases, most notably income tax hikes. New personal or corporate taxes, or objects of such state taxes, are also in play. Tribal governments and Indian gaming proceeds are categorically immune from any state taxation under federal law. Notwithstanding, states like California are already seeking to tax Indian gaming revenues -- for example, once those monies trickle downstream to tribal members. Even though federal law also immunizes tribal members from state taxation, individual Indians, especially those living or doing business off-reservation, should expect to increasingly be the targets of state income tax assessors.
State tax assessors will tax Indians now, and sort out the legalities -- or illegalities -- later.
To preemptively frustrate any state's attempt to balance its budget on the backs of individual Indians, tribes and tribal members should aggressively engage in tribe-wide tax planning and if necessary, tax protest and litigation. Will your tribe be ready when the state tax man cometh?
Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. He can be reached at 206.691.3631 or firstname.lastname@example.org, or via galandabroadman.com.