Beyond Gaming: the Cherokee Nation, Taxes, and K12

The Tulsa World recently ran an article on a generous donation to Oklahoma public schools from the Cherokee Nation. Gaming revenues, you ask? Not this time -- the tribe donated 38% of the revenue they received from tribal vehicle tags (approximately $3 million) to public education, as mandated by tribal law. (The distribution of funds was made based on the number of Cherokee students per school district but the funds are unrestricted). Which brings us to a common question –

How do tribes have the authority to charge, collect, and distribute taxes (in this case to education) without state interference?

While this situation (and the Indian gaming one) are often portrayed by the media and legislators as an “unfair advantage” or “special privileges,” in fact the tribes’ tax exemptions and authorities are grounded in the treaty relationship that some tribes, like the Cherokee, have had with the U.S. government since first contact. By making treaties with tribes, the nascent U.S. government recognized tribes as separate, sovereign nations – and sovereignty, at its roots, is the power of people to govern themselves. For most nations this “power to govern” also involves the power to create revenue for its government via tax, trade, etc with other nations.

Based on their treaty/sovereignty status then, tribes should have a nation-to-nation relationship with the United States federal government, and should not be subject to state jurisdiction (or taxes). (Ex: Only the United States has the power to negotiate with Germany – not the state of Minnesota.) However, over time, the Supreme Court has created a body of federal Indian policy that is “to say the least, schizophrenic”. At this point in time though, tribes still retain the power to tax their own enrolled tribal members (as the Cherokee Nation has done with the tribal vehicle tags that funded the K12 donation).

While tribes and state taxation issues can be tricky, they are not impossible—particularly if both parties have a decent understanding of tribal sovereignty and state relations. Here’s hoping that the Cherokee Nation’s education funds begin creating that understanding in Oklahoma public schools!

PS For those of you wondering about gaming and Minnesota taxes, the Minnesota Senate has put together a helpful FAQ page.