Tax Notes logo

SALT Policies to Reduce the Disparate Impact of COVID-19 in Indian Country

Posted on Feb. 15, 2021
Pippa Browde
Pippa Browde

The Search for Tax Justice is a Tax Notes State series examining the inequities inherent in state and federal taxes.

In this installment, Pippa Browde, an associate professor at the Alexander Blewett III School of Law at the University of Montana, discusses how state and local tax policies could address the disproportionately high impact of the COVID-19 pandemic on tribal governments and their peoples.

Copyright 2021 Pippa Browde.
All rights reserved.

In the wake of the COVID-19 pandemic and economic fallout, the Brookings Institution estimates that state and local revenues will decline by $188 billion in 2020, $189 billion in 2021, and $167 billion in 2022.1 Because states and localities often have balanced budget requirements, this revenue drop will likely correspond with spending cuts.2 Because they are still fighting the pandemic, state and local governments’ ability to cut spending is limited. And given this reality, they will most certainly look for ways to increase revenue.

The pandemic’s economic consequences have been even more severe for Native American Indian tribes, their governments and revenues.3 Tribal business enterprises — many of which focus on tourism, hospitality, and gaming — have been closed or restricted in operation throughout the pandemic. This has resulted in “the almost total drying up of business revenue-dependent tribal budgets.”4

States and tribes have long engaged in bitter battles over competing tax authority.5 And, as we emerge from the pandemic, states and localities may consider expanding their taxes as much as possible to shrink revenue shortfalls. In this context, state and local governments could aggressively assert state and local taxing authority in Indian country as a means to increase revenue.

A tribe has the sole authority to impose tax over its own members within its own reservations.6 Generally, tribes also have the authority to tax transactions involving nonmembers that occur within their reservation.7 When nonmembers conduct business in Indian country, there are situations in which states may also be able to tax the transaction.8 The jurisprudence on when and under what circumstances a state may tax transactions involving nonmembers that occur within Indian country is complex and beyond the scope of this essay.9 When states and tribes have concurrent or potential jurisdiction over the same transactions that occur in Indian country, there is the potential for double taxation — a question historically answered by the courts.10 But litigation is time-consuming and expensive, and the uncertainty of potential double taxation deters much outside investment in Indian country.11

As we look to the future and imagine post-pandemic economies for states, localities, and Native American Indian nations, states have an opportunity to help support tribal economies while growing their own economies in the long term. This essay sets forth the case that states should, at a minimum, adopt policies requiring government-to-government negotiations that respect tribal sovereignty or, even better, refrain from asserting their potential taxing authority over transactions in Indian country. In doing so, states would support the revitalization of tribal economies and position themselves for sustainable long-term growth.12

The COVID-19 pandemic has had a disproportionate effect on American Indian individuals and tribal communities.13 The disparate impact of COVID-19 within Indian country is perhaps most visible in the comparative statistics of infection and mortality rates of the virus among Native American Indians compared with non-Native individuals.14 Early in the pandemic, virus infection rates on tribal lands were more than four times higher than the rest of the United States.15 The deaths of many Native American Indian elders amount to a “cultural crisis” not only because of the elders’ depth of knowledge of tribal language and customs, but also because of the important leadership role elders play in many tribal nations.16

As bad as the pandemic’s economic fallout has been for state and local governments, the economic consequences to tribes have unquestionably been more severe. While it is impossible to generalize how the 574 tribal nations in the United States create revenue, many — if not most — of these tribal economies have suffered catastrophic economic losses.

Tribes that depend on tourism, hospitality, and gaming have closed their businesses to stave off COVID-19 infections. Data show that as of June 2020, the casino closures starting in March 2020 resulted in an “estimated loss of more than $4.4 billion in economic activity [and] $997 million in lost wages.”17

Aware that stringent closures result in economic losses, tribes have chosen to protect human life over revenues. The Blackfeet Nation, located in Montana and adjacent to the eastern side of Glacier National Park, remained closed and in lockdown even after the state began to allow reopening after initial lockdowns in March 2020.18 Blackfeet’s economy depends on tourism, mostly connected with neighboring Glacier National Park.19 But, rather than allow the thousands of tourists flocking to Glacier’s east entrances to cross the Blackfeet’s reservation, the Tribe closed the reservation through the entire summer tourist season.20

Blackfeet’s decision to close its reservation to outsiders was respected and supported by then-Montana Gov. Steve Bullock.21 Other tribes, in exercise of their sovereignty, made similar decisions to close their reservations and impose quarantines and curfews — but were met with opposition and hostility from state and local leaders. The Oglala Sioux and Cheyenne River Sioux tribes of South Dakota, for example, also restricted access through their reservations,22 but South Dakota Gov. Kristi Noem sought to prohibit them from enforcing their closures against nonmembers, even going so far as requesting federal intervention.23 Another example of local attempts to interfere with tribal sovereignty during the pandemic were letters from New Mexico sheriffs to the Navajo police “insisting that the tribe refrain from citing nonmembers” during a tribe-instituted curfew to mitigate the spread of COVID-19.24

The evaporation of tribal revenues has been compounded by the fact that two state and local revenue sources are not available to tribes. States and localities are heavily reliant on property tax revenue,25 but tribes cannot tax much of their reservation land because it is held in trust by the federal government.26 States also derive much of their tax revenue — almost 20 percent — from individual income taxes.27 As a practical matter, although tribes have the authority to impose income taxes on their members, many individuals living within Indian country do not have significant income to tax nor are tribal governments interested in assessing or collecting taxes from their own members.28

The lack of these revenue streams and the losses caused by health and safety measures taken during the pandemic have “impaired tribes’ ability to provide essential governmental services such as health care, education and public safety at a time when the need is highest.”29 This continues a trend that started generations ago, putting the tribes in a no-win situation that forces them to rely largely on support from the federal government, which over the last year has essentially looked the other way.

The disparate health and economic impacts of the COVID-19 pandemic in Indian country are nothing new.30 Rather, the consequences of the pandemic felt by tribes and their peoples are the result of over 400 years of oppressive policies imposed on tribes.31 Until recent decades, these policies reflected only federal priorities and amounted to dynamic vacillations of the federal government’s interpretation of the obligation to protect “tribes and their properties, including protection from encroachments by the states and their citizens.”32 That obligation — referred to more broadly as the trust relationship — was generally based on the notion that when tribes relinquished their ancestral land to the federal government, the federal government had an obligation to respect tribal nations’ unique political sovereign status and also provide for their welfare.33

Rather than truly honor those obligations, the federal government, however, has “consistently fallen short . . . by severely underfunding almost every dimension of the trust relationship through budget cuts, neglect, and usurpation of sovereign authority.”34 The disparate impact of COVID-19 within Indian country is a result of these historic and ongoing failures of the federal government to keep its promise to tribes.35

One way that the federal government has failed to fully meet its trust obligations is by tolerating, if not outright condoning, state encroachment on Indian tribes’ sovereignty and jurisdictional authority.36 State attempts to limit tribal sovereignty during the pandemic include the examples of Noem threatening to sue the Cheyenne River Sioux and Oglala Sioux over their quarantine roadblocks, as well as the request from county sheriffs in New Mexico for Navajo police to refrain from citing nonmembers who violated a tribal curfew on the Navajo reservation in place to curb infections.37

At the same time that the pandemic has taken hold of the world, the explosion of racial justice movements has prompted a global reckoning of racial and economic justice.38 As with other people and communities of color, American Indians have also felt the “negative impact of overly harsh policing and intrusion.”39 Social justice movements for Native American Indians are not just about race; they “also stem from the political status of the inherent sovereignty of tribal nations and Indigenous peoples.”40

At the heart of the discussion of tribal sovereignty is tribal governments’ focus on their “distinctly unique relationship to particular places, particular land.”41 A tribe’s connection to its land affects economic justice because “the resources available for Indigenous peoples were primarily with land and access to land but also water rights, mineral rights, access to resources like rivers and ocean fronts that [produced food], forests and other aspects of the environment.”42 Beyond the nation’s broader reckoning with racial and social justice, to adequately address racial, social, and economic justice within Indian country means “returning land, returning resources to Indigenous peoples,” and doing so “in an equitable way and an economically successful way.”43

Despite progress by the federal government over the last 40 years, the pandemic has laid bare the necessity for meaningful tribal self-governance and respected sovereignty.44 The call for self-governance and sovereignty in Indian country is more than a call for control over criminal jurisdiction.45 According to professor Randall Akee, “it all comes down to jurisdiction, self-governance and having the land base to be sustaining.”46

Much of the story told in this essay is not about states. Federal responses to the pandemic in Indian country contributed to the health and economic challenges tribal governments face. For example, emergency funding under the federal Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) intended for tribes required some tribal governments to sue the federal government for relief.47 Tribes that did receive CARES Act funds were required to comply with bureaucratic measures and submit data on their members and expenditures that states did not.48 Even then, tribes had to sue to ensure their fair share of the funding.49 The failings of the trust relationship rest squarely on the federal government.

In the post-COVID world, there are clearly many ways in which the federal government can improve its policies towards tribal nations. In particular, given its trust obligations the federal government will be central in helping remedy the disparate impact felt by tribes. States can also play a positive and affirmative role in helping tribes recover from the disparate impact of the pandemic. And contrary to the historic conflicts between states and tribes, doing so can be approached and achieved in a cooperative and mutually beneficial way. In particular, states and localities can reconsider their tax laws and policies regarding taxation in Indian country.

First, states can restore and respect government-to-government consultations and agreements with tribes. A state’s recognition of tribal sovereignty means dealing with the tribe as an equal government. In practice, this means engaging with the tribes in timely, respectful, and meaningful ways on matters that affect them. But recognizing and respecting tribal sovereignty goes beyond states merely consulting with tribes about planned courses of action; it requires partnering with tribes to make joint decisions.50 As Mark J. Cowan discusses in his article,51 one way this can be accomplished is revenue-sharing agreements or tax compacts.

Second, states can allow for primacy of tribal taxation in Indian country.52 When state and local governments tax transactions occurring within Indian country, the effective double tax either creates a financial disincentive for nonmember investors and businesses or dissuades the tribal government from asserting their taxing power, effectively curtailing tribal revenue. When the legitimacy of the state or local tax is uncertain, the possibility of litigation is a similar disincentive to outside investment. If states and localities deferred to tribes and refrain from asserting their potential taxing authority, tribes would not only benefit from their own tax revenues, but they would also retain the ability to attract outside investment, furthering the tribes’ economic development.53 Recognizing tribes as primary and appropriate sovereigns to be exercising taxing authority over transactions that the state could possibly tax would allow them to grow their tax bases, increase economic development, and better provide for their members.54

Far from an all-or-nothing proposition, states will not sacrifice their potential tax revenues in vain. Economic studies show that growth on reservations benefits state economies in two ways. As tribes are better positioned economically to provide for members who require social services and government assistance, states will be relieved of that burden. And when tribal economies grow, state economies have corresponding growth.

Beyond these direct economic benefits to states, appropriate and due respect for tribal sovereignty would enable state-tribal relationships to begin the process of healing the wounds of historic enmity. Shared commitment to such reconciliation would also help states and tribes to begin to heal the recent — but no less deep — pain shared by citizens of tribes and states caused by COVID-19.


1 Louise Sheiner and Sophia Campbell, “How Much Is COVID-19 Hurting State and Local Revenues?” Brookings Institution (Sept. 24, 2020). These estimates include declines in fees from hospitals and higher education. The decline in state and local revenues reflects income tax revenues and declines from other taxes and fees because of reduced consumption on “hotels, tolls, airports, and motor fuels.” Id.

2 Id.

3 A note on terminology: The terms “Indian tribe,” “tribe,” and “Indian nation” refer to “a group of Indians that is recognized as constituting a distinct and historically continuous political entity for at least some governmental purposes.” William C. Canby Jr., American Indian Law in a Nutshell 4 (2015). “Indian country,” as defined by federal statute, “means (a) all land within the limits of any Indian reservation . . . including right-of-way running through the reservation, (b) all dependent Indian communities within the borders of the United States . . . and (c) all Indian allotments, the Indian titles to which have not been extinguished, including rights-of-way running through the same.” 18 U.S.C. section 1151. This definition is for purposes of criminal law, but it also applies to describe the land described in this article. The term “Native American Indian,” for the purposes of this article are members of Indian Tribes, whether or not they reside within Indian country.

4 Sahir Doshi, Allison Jordan, and Kate Kelly, “The COVID-19 Response in Indian Country: A Federal Failure,” Center for American Progress (June 18, 2020).

5 See e.g., Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163 (1989); White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980); and Moe v. Confederated Salish and Kootenai Tribes of the Flathead Reservation, 425 U.S. 463 (1976).

6 Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134 (1980) (holding that a tribe can impose a tax on cigarettes on its own members).

7 Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 140-41 (1982). The Supreme Court has limited such authority in significant ways. See Atkinson Trading Co. v. Arizona State Tax Commission, 411 U.S. 164 (1973).

8 See Confederated Tribes of Colville Indian Reservation. For a more detailed description of tribal and state taxing authority within Indian country, see Pippa Browde, “The Need to Compact in State-Tribal Tax Revenue Sharing,” State Tax Notes, Nov. 13, 2017, p. 649.

9 For the seminal work on this issue, see Richard D. Pomp, “The Unfulfilled Promise of the Indian Commerce Clause and State Taxation,” 63 Tax Law. 897, 994-1208 (2010).

10 Id.

11 For a complete discussion of the economic consequences of double taxation or the prospect of double taxation, see Kelly S. Croman and Jonathan B. Taylor, “Why Beggar Thy Indian Neighbor? The Case for Tribal Primacy in Taxation in Indian Country,” the Harvard Project on American Indian Economic Development, at 1-24 (May 4, 2016).

12 Id. at 14-17.

13 Doshi, Jordan, and Kelly, supra note 4.

14 Id. This study highlighted data as of June 18, 2020, that showed that the Navajo Nation had the highest infection rate in the United States and that Native people make up only 0.1 percent of the population of New Mexico but more than 55 percent of the coronavirus cases in the state. Id. The rate of infection of COVID-19 among Native American Indian and Alaska Natives is three times that of whites, resulting in hospitalization rates more than 5.3 times higher than that of whites and dying at 1.4 times the rate of whites. Kalen Goodluck, Lucy Meyer, and Anjali Shrivastava, “A Crude Virus: How ‘Man Camps’ Can Cause a COVID Surge,” High Country News, Jan. 8, 2021.

15 Stephanie Russo Carroll et al., “Indigenous Data in the COVID-19 Pandemic: Straddling Erasure, Terrorism, and Sovereignty,” Social Science Research Council (June 11, 2020). The full data on infections and mortality among Native American Indian individuals remain elusive for a number of reasons, but it is certainly lower than reported data. Id.

17 Doshi, Jordan, and Kelly, supra note 4.

18 Kathleen McLaughlin, “A Closed Border, Pandemic-Weary Tourists and a Big Bottleneck at Glacier National Park,” The Washington Post, July 11, 2020.

19 Victor Yvellez, “Virus Fight: Blackfeet Covid Restrictions Take Toll,” Missoulian, Oct. 27, 2020.

20 Id.

21 McLaughlin, supra note 18.

22 Id.

23 Id.

24 See Matthew L.M. Fletcher, “Indian Lives Matter: Pandemics and Inherent Tribal Powers,” 73 Stanford L. Rev. Online 38 (June 2020) for detailed citations pertaining to this incident.

25 Local governments derive up to 30 percent of their tax revenue from property taxes. See Urban Institute, “Property Taxes.”

26 Marbury v. Madison, 5 U.S. 137 (1803).

27 Urban Institute, “State and Local Revenues.”

28 Canby, supra note 3, at 314.

29 Doshi, Jordan, and Kelly, supra note 4, at 3.

30 Fletcher, supra note 24 at 38. (“American Indian people know all too well the impact of pandemics on human populations, having barely survived smallpox outbreaks and other diseases transmitted during the generations of early contact between themselves and Europeans.”).

31 It is impossible to provide 400 years’ worth of history on the relationship between tribes and the federal government in an essay of this size. See Canby, supra note 3, at 13-34, for a succinct but excellent overview of the history of the specific policies of the federal government regarding Native American Indian tribes.

32 Canby, supra note 3, at 2.

33 Canby, supra note 3, at 35-39.

34 Doshi, Jordan, and Kelly, supra note 4 at 3. “At the root of all these vulnerabilities are the broken promises that the federal government made to tribes in the constitutional process of signing treaties to acquire their lands. Tribes ceded huge swaths of land to the United States with the formal, treaty enshrined understanding that the federal government would protect the tribes as sovereign political entities whose right to self governance it would safeguard and to whom it would provide adequate resources to deliver essential services.” Id.

35 Doshi, Jordan, and Kelly, supra note 4.

36 Fletcher, supra note 24, at 38-41.

37 See id. at 38 for more detail and citations.

38 I do not purport to correlate the pandemic and the racial justice protests, though there is some research to support the notion that “the pandemic’s negative financial consequences have . . . been helping fuel the protests.” Maneesh Arora, “How the Coronavirus Pandemic Helped the Floyd Protests Become the Biggest in U.S. History,” The Washington Post, Aug. 5, 2020.

39 Interview by Susan Smith Richardson with Randall Akee, Professor of American Indian Studies at UCLA, “Native Americans and the Racial Reckoning,” Center for Public Integrity (Oct. 21, 2020).

40 Id.

41 Id.

42 Id.

43 Id.

44 As the federal government has moved away from paternalistic policies toward tribes, “tribes have been allowed to take on much more of their administering of programs and projects and service to the community. And the federal government has stepped out and provided the funding in many of those cases. In other cases, the tribes have gone even beyond the existing funding and invested their own resources into expansion of housing programs or health programs or education programs that go above and beyond what the federal government . . . provides.” Id.

45 Id. “Local control [over nonmembers and members] has improved local conditions” in the context of criminal police powers. Id.

46 Id.

47 The U.S. Supreme Court recently granted cert in the dispute between the U.S. Department of the Treasury and six tribes over CARES Act funding eligibility in two consolidated cases. Mnuchin v. Confederated Tribes et al.; AK Native Village Corp. et al. v. Confederated Tribes et al.

48 Carroll, supra note 15. To compound the matter, there was a massive data breach that resulted in the unauthorized disclosure of sensitive data belonging to tribes and their members. Id.

49 Shawnee Tribe v. Mnuchin, No. 20-5286 (D.C. Cir. Jan 5, 2021).

50 Stephen Cornell and Joseph P. Kalt, “Two Approaches to Economic Development on American Indian Reservations: One Works, the Other Doesn’t,” in Resources for Nation Building: Governance, Development and the Future of American Indian Nations, at 18 (2006).

51 See Mark J. Cowan, “State-Tribal Compacts and the Taxation of Nonmembers,” Tax Notes State, Feb. 15, 2021, p. 679.

52 These suggestions are not novel, but current circumstances create a tremendous opportunity for states to shift direction. See Croman and Taylor, supra note 11, at 27-29.

53 The economic studies also support the position that when states cede taxing authority, there is the collateral benefit of reducing conflict between tribes and states. Id. at 28.

54 Id. at 14.


Copy RID