18 - Tribes as Nations

Summary

When tribes are allowed to operate as governments, states will push back because states fear tribal competition. In particular, states are concerned tribes will offer lower tax rates and other legal incentives to attract businesses to their land. This is a misguided concern. States already craft numerous exceptions to their laws, often designed specifically for their favorite corporations; plus, the source of state power over tribes is lacking. Apart from this, tribal development benefits states. New jobs in Indian country often employ non-Indians who purchase goods and pay taxes off reservation. Thus, tribal sovereignty also serves as a shield against state protectionism and promotes economic opportunities that benefit everyone.

A corollary of affirming tribal law and jurisdiction is excluding states from exercising authority in Indian country. When states exercise jurisdiction over Indian country, it creates confusion. Should an individual follow tribal law or state law? Which police should an individual call? Which court should a grievance be filed in? And which government should be blamed for the inadequate roadways? Confusion over which government has authority leads to problems with government accountability. If individuals do not know which government is responsible for a problem, individuals will have difficulty mustering the political will to bring about institutional reform.

Respecting tribal governments as the primary force in Indian country aligns well with the United States’ federalist system. Federalism enables each state to craft its own unique rules, and individuals respond to the laws. People regularly cross state borders to take advantage of lower tax rates, liberal alcohol laws, and more favorable interest rates.¹ Nevada developed laws favorable to gaming while gaming was illegal in most states; thus, Nevada became the United States’ premier gaming destination. Likewise, Delaware has long made an industry out of its corporate law. As a result, approximately two-thirds of all Fortune 500 companies are incorporated in Delaware although the state is less than 1 percent of the United States’ landmass – several reservations are larger than the state² – and has a population of barely one million. Corporations flock to Delaware because it has developed superior corporate law. Federalism allows each state to conduct policy experiments and serve as legal laboratories from which other jurisdictions can learn. Tribes can add to federalist system.

18.1 State Opposition

States will likely oppose efforts to respect tribal boundaries as they have long been regarded as tribes’ “deadliest enemies.”³ The reason is states view tribes as competition. States have opposed tribal gaming and cannabis while not minding that other states permit those activities. Moreover, states allow their citizens to freely travel to locations with taboo festivities. Indian country is simply another sovereign destination. If states view tribes as legitimate sovereigns, state hostility to tribal public policy choices may fade.

But states’ greatest Indian country fear is tribal tax sovereignty. States are leery of tribes marketing tax advantages as a means of drawing consumers to Indian country. The Supreme Court has sided with states since the 1970s, describing lower tribal tax rates as “an artificial competitive advantage over all other businesses in a State.”⁴ Likewise, the Supreme Court asserted, “[T]he competitive advantage which the Indian seller doing business on tribal land enjoys over all other cigarette retailers, within and without the reservation, is dependent on the extent to which the non-Indian purchaser is willing to flout his legal obligation to pay the tax.”⁵ This portrayal implies tribes are not legitimate governments, which is both ahistorical and inconsistent with the federal government’s tribal self-government policy.

While states may not like tribes’ economic policies, state prerogatives should not govern Indian country. The United States Constitution deprives states of authority over Indian affairs. Thus, states cannot constitutionally impose their laws upon tribes, nor does the Constitution allow states to supersede the federal government’s tribal self-determination policy.⁶ As the Supreme Court explained:

If anything, the Indian Commerce Clause accomplishes a greater transfer of power from the States to the Federal Government than does the Interstate Commerce Clause. This is clear enough from the fact that the States still exercise some authority over interstate trade but have been divested of virtually all authority over Indian commerce and Indian tribes.⁷

The Constitution commands that state interference in tribal affairs must end unless and until Congress authorizes the state action.

Furthermore, the enabling acts and constitutions of eleven states expressly forbid states from exercising jurisdiction over the Indian tribes within their borders.⁸ For example, the legislation granting Washington statehood declares, “[S]aid Indian lands shall remain under the absolute jurisdiction and control of the Congress of the United States,”⁹ and the Washington Constitution contains the same exact language.¹⁰ Nonetheless, Washington and other states with these disclaimers routinely attempt to exercise jurisdiction over the tribes within their borders. State taxation of tribal commerce contravenes the United States Constitution and state laws requiring states to leave tribes alone.

Legal issues notwithstanding, fear of tribal law diverging from the surrounding state is overplayed. Tribes generally want the same thing as the surrounding state. That is, tribes want their communities to be safe and have economic opportunities. This places a natural limit on tribal legal deviation from states. Additionally, states already craft numerous exceptions to their own laws. Put simply, many state laws do not uniformly apply throughout a state’s territory. Indeed, states and municipalities regularly enact laws to give particular businesses a competitive advantage. The Magic Kingdom is a prime example.

Walt Disney wanted to build the Magic Kingdom in Florida, so he lobbied the Florida legislature to create a special jurisdiction for his park. He succeeded. The Reedy Creek Improvement District, renamed the Central Florida Tourism Oversight District in 2024,¹¹ was authorized by the Florida legislature in 1967 and essentially made the 25,000-acre Magic Kingdom into an independent municipality.¹² Thus, the Reedy Creek Improvement District – which is controlled by Disney – can collect taxes and issue bonds. This enables Disney to provide government services like fire protection, road maintenance, and waste management.¹³ Through the Reedy Creek Improvement District, Disney can bypass municipal zoning and permitting requirements. In fact, one state senator claimed the Reedy Creek Improvement District authorized Disney to build a nuclear power plant on its property without seeking additional state approvals.¹⁴

The Reedy Creek Improvement District gives Disney a significant competitive advantage over its rivals, including Universal, Legoland, and SeaWorld.¹⁵ Accordingly, the Reedy Creek Improvement District has long been controversial as members of the Florida legislature have described the District as “anti-economic liberty” and an “aberration of the free market.”¹⁶ Following a political dispute with Florida’s Governor, the legislature passed a bill dissolving the Reedy Creek Improvement District. However, the dissolution was not immediate. It also is not clear whether the legislature can revoke the Reedy Creek Improvement District because Florida law requires special districts be dissolved by a majority vote of the district’s landowners, and Disney owns the majority of land in the Reedy Creek Improvement District.¹⁷ Additionally, eliminating the District would make Florida taxpayers responsible for approximately one billion dollars’ worth of debt.¹⁸ The future of the Reedy Creek Improvement District remains to be seen.¹⁹

Regardless of what happens to the Reedy Creek Improvement District, it is only one of many such legal blessings states have bestowed on their favorite corporations. In fact, there are more than 50,000 special districts in the United States.²⁰ Though the purpose of special districts varies, some exist to benefit a particular interest group.²¹ States and counties also routinely use financial instruments, such as tax breaks and subsidies, to entice businesses. A “Prime” example was cities and states throwing money at Amazon in hopes of luring an Amazon corporate headquarters (HQ2). Chicago, Illinois offered to let Amazon control the expected $1.32 billion in personal income taxes paid by Amazon’s employees.²² New Jersey offered Amazon $7 billion in tax breaks.²³ All but seven states submitted bids to land the Amazon HQ2.²⁴ Despite regularly granting special tax breaks and legal privileges to corporations, states continuously assert it would be unfair for tribes to have different laws than the state. There are no principled reasons why states insist tribes conform to state law while states provide their favorite businesses with carve-outs.

18.2 Tribal Self-Governance and the Federalist System

Once freed from external governments, tribes will be responsible for their futures. Tribes should continue to receive federal money – as do states and even foreign countries – without diminishment of their sovereignty. Moreover, tribes are owed federal funds pursuant to hundreds of treaties. But aside from federal financial support, tribes should be on their own. Political independence means political accountability; that is, if a tribal government is performing poorly, its citizenry knows who is responsible and can replace its leadership. Under the current system, tribal leaders can rightly blame tribal woes on states and the federal government. With political autonomy, tribes will own the benefits and costs of their choices.

Tribes may use their sovereignty to compete with states, but so what? As noted, states use their laws to compete with other states for economic opportunities, and states even forge exceptions to their laws for their corporate favorites. Tribes should be able to engage in the same behavior. Nothing in the United States Constitution prevents tribes from competing with states; indeed, tribes have a greater claim to autonomy than the states because the Constitution did not abridge tribes’ inherent sovereignty.²⁵ Of course, the federal government has long prohibited tribes from governing themselves, but the age of imperialism has ended – at least outside of Indian country. If the federal government is to honor treaties and its tribal self-determination policy, tribes must have the same ability to control what happens within their borders as states do within theirs.

States, particularly those with significant Indian country within their borders, will assert this upsets state power. The Supreme Court addressed this issue in 2020 when it ruled the Creek Reservation had never been disestablished, averring, “But what are we to make of this? Some may find developments like these unwelcome, but what we are told others may celebrate them.”²⁶ Whatever the perils of displacing state law with tribal law may be, the Court explained they “are not a license for us to disregard the law.”²⁷ And the law is clear. Pursuant to the original understanding of the United States Constitution, states have no authority over Indian tribes.²⁸ Therefore, tribes should be free from state interference.

18.3 Tribal Sovereignty Can Benefit States

State fears of tribal competition are shortsighted. States may lose some sales and property tax revenue; however, states will benefit from tribal economic development. Businesses operating in Indian country overwhelmingly employ non-Indians. Even if the state collects no taxes from Indian country commerce, the individuals employed by tribes will pay state taxes when they leave Indian country.²⁹ Plus, off reservation businesses will have new customers in Indian country. As the Lake Chelan Chamber of Commerce in Washington explained, “[The Mill Bay Casino on the Colville Reservation is] the single largest private business employer in the region, pumping payroll dollars into every facet of our community through direct purchases, indirect purchases, payroll taxes, school taxes, sales taxes and more.”³⁰ In addition to private business growth, tribes routinely build infrastructure,³¹ as well as provide other governmental services, thereby alleviating the state of these obligations. Accordingly, Indian country economic development leads to state economic growth.

While taxation is a major battleground, environmental regulation is the area where tribal sovereignty has the greatest potential to upset state policy. Environmental policy is inherently tricky because pollution is not easily containable; hence, pollution often has impacts on third parties. For example, toxins dumped into a tribal stream can impact off reservation users, and several tribes are involved with oil and other high-pollution industries. But concerns about extreme tribal pollution are misplaced because federal law preempts the field, and tribes are bound by federal law. Hence, tribes cannot become laissez-faire, extractive-industry paradises imposing contaminants on the surrounding states.

On the flipside of the coin, tribes can already act as states under the Clean Air Act, Clean Water Act, and other environmental statutes. Under tribes as states (TAS) status, tribal environmental quality standards can be more stringent than the surrounding state and extend off reservation. This status has existed for decades, and the evidence indicates tribes exercising TAS status see significantly improved environmental outcomes as tribes are much more likely to diligently protect their natural resources than distant federal bureaucrats or the surrounding state.³² Although Indian country environmental protection substantially improves under TAS, state economies have not been undermined. Consequently, state fears of tribal sovereignty shackling state governments are unfounded.

Significantly, respecting tribal sovereignty does not mean tribes and states must become rivals. Honoring tribal autonomy presents opportunities for tribal–state collaboration. Several tribes and states have already entered compacts over taxation, natural resource management, and other governmental matters. Although compacting can work well, states usually have leverage under current law because the Supreme Court often allows them to impose their laws on Indian country. Treating tribes as sovereigns merely levels the playing field. Assuming tribal–state animosities flare, Congress can legislate to resolve the issue.³³ However, there are reasons to believe tribes and states can collaborate to make life better for their citizens.

18.4 Tribes as Shields from State Protectionism

States frequently ban peculiar things that are legal in other states. One of the more common protectionist laws governs car dealerships. Many states have laws preventing automobile manufacturers from selling cars directly to consumers.³⁴ Car dealers favor these laws because they give them a monopoly. Limited competition means car dealers can charge higher prices. However, dealer laws restrict consumer choices.

These dealer laws present a problem for Tesla. In fact, Tesla could not open in New Mexico and many other states because it is not a traditional, franchised car dealership. New Mexicans could evade the ban by driving to a surrounding state, and several did. When they did, no one was harmed. All that happened was local monopolists lost business. Tesla tried to have the law changed, but the state’s established car dealers blocked attempts to open the car market.

Since protectionist policies prevented Tesla from opening in New Mexico, Tesla decided to open on Nambé Pueblo land in September of 2021.³⁵ Just like before, New Mexicans can avoid protectionist state laws and purchase a Tesla. But now, they do not have travel to Colorado, Arizona, or Utah. This is helpful when one’s Tesla has a maintenance issue. Aside from Tesla’s competitors, everyone in New Mexico is better off because Nambé Pueblo allowed Tesla to open on its land.³⁶ Even New Mexico’s Governor, Michelle Lujan Grisham, applauded Nambé’s partnership with Tesla.³⁷

Tesla’s Nambé Pueblo operation has been a success; accordingly, it opened a branch on the Santa Ana Pueblo in New Mexico a year later. As Patrick Brenner, president of the Southwest Public Policy Institute, explained in an op-ed:

The ability of Tesla to leverage tribal partnerships is of definite benefit to Santa Ana Pueblo, Nambé and others, and they are stepping up to fill a gap created by overly burdensome state governments. This brings dollars into the pueblos, which benefits Tesla, and thus benefits consumers directly by facilitating access to electric vehicle purchases.³⁸

Brenner further noted, “If New Mexico, its legislative body and Lujan Grisham refuse to address antiquated laws that patently inhibit positive business activity, tribal leadership has an incredible opportunity to step in. They are providing real solutions, whereas state government just puts up roadblocks as it cozies up to industry lobbyists.”³⁹ Thus, Tesla’s tribal partnership benefited New Mexicans by creating choices that were outlawed by outmoded state laws.

18.5 Tribal Self-Governance and a Mississippi Miracle

The Mississippi Band of Choctaw Indians is the premier example of a tribe benefiting the surrounding state. The Choctaw were the poorest people in the poorest state from 1830 to the 1970s. Prior to the Indian Removal Act of 1830, the tribe had built a dynamic economy. Removal crushed the Choctaw economy, and the Choctaw remaining in Mississippi endured extreme hardship, including racism and another forced relocation during the allotment era. A 1918 federal report on the Mississippi Choctaw noted, “They are almost entirely farm laborers or sharecroppers. They are industrious, honest, and necessarily frugal. Most of them barely exist, and some suffer from want of the necessaries of life and medical aid. In many of the homes visited by me there was conspicuous evidence of pitiable poverty.”⁴⁰

Phillip Martin was born to a poor Choctaw family seven years after the report. Martin attended a Bureau of Indian Affairs boarding school in Cherokee, North Carolina then joined the United States Air Force to serve during World War II.⁴¹ Martin remained in Europe after the war. As he watched European governments rebuild, he wondered:

If rebuilding could happen in France and Germany, then why not in Neshoba County, Mississippi? If seed money could jump-start an economy in Frankfurt, then why not on an Indian reservation? If the survivors of World War II could draw strength from adversity and form their own cultural traditions, then why not the Choctaws?⁴²

Martin retired from the United States Air Force in 1955 and returned to Mississippi.⁴³ He began his career in tribal leadership two years later.⁴⁴

Conditions were bleak on the Choctaw Reservation and there were few opportunities for improvement. The non-Indian communities near the Choctaw Reservation were sparsely populated; Jackson, Mississippi – located over an hour away – was the biggest city. Moreover, the Choctaw Reservation contains no natural resources. But the Great Society programs of the 1960s presented Martin with a chance. Instead of allowing the federal government to build low-income housing on the reservation, Martin had the tribe create a construction company, Chahta Development. Chahta Development used federal funds to employ Choctaw citizens to build the tribal housing.⁴⁵ Chahta Development provided good paying jobs, as well as experience, to dozens of Choctaw citizens.

Chahta Development was a success, but Martin believed the Choctaw people would never be self-sufficient if they depended on the federal government and tribe for employment. Accordingly, Martin sought to attract private businesses to the Choctaw Reservation. To do this, he reformed the tribe’s laws and essentially turned the reservation into an enterprise zone.⁴⁶ Tribal sovereignty enabled the Choctaw to establish their own zoning authority and other commercial regulations.⁴⁷ However, legal reform was only part of the equation. The Choctaw needed a business to operate on its reservation. Martin did not have any flashy gimmicks. Martin personally handwrote 500 letters asking companies to locate on the Choctaw Reservation. In 1978, General Motors answered the letter and opened a 42,000-square-foot plant on the reservation.⁴⁸

Martin was elected chief of the Mississippi Band of Choctaw Indians in 1979 and immediately turned to building relationships with local non-Indian governments. Mississippi is not known for its racial harmony, and the Choctaw experienced discrimination since the United States’ founding. Nevertheless, Martin was able to build strong rapport with nearby Philadelphia, Mississippi. Martin did this by emphasizing that Choctaw development benefits everyone in Mississippi. In fact, many of those who had long discriminated against the Choctaw were now turning to the tribe in search of employment. Martin’s outreach efforts succeeded as the city of Philadelphia issued industrial revenue bonds to finance the construction of an American Greetings Corporation facility on the Choctaw Reservation,⁴⁹ the first time municipal bonds had been used for tribal economic development.⁵⁰ Martin would go on to serve six consecutive terms as tribal chief and recruit dozens of businesses to the Choctaw Reservation.⁵¹ The Mississippi Band of Choctaw Indians were economically self-sufficient a decade before it opened the first casino on its reservation.

Owing to Martin’s leadership, the Mississippi Band of Choctaw Indians became an economic powerhouse. The tribe had less than $100,000 in assets when Martin entered office and more than a billion dollars in assets when he left.⁵² The tribe went from being a poverty haven to one of the five largest employers in Mississippi, with approximately 9,000 full-times jobs on the reservation.⁵³ The tribe currently owns businesses throughout North America⁵⁴ and produces everything from car parts to plastic cutlery for fast-food restaurants.⁵⁵ As a result of economic development, Choctaw life expectancy increased by twenty years while Martin was in office.⁵⁶ Similarly, economic growth enabled the tribe to provide healthcare and education for its citizens. And instead of being a burden on the state, Mississippi now counts on the Choctaw to employ thousands of its non-Indian citizens.⁵⁷

Martin’s influence went far beyond his own tribe. His served in numerous Indian country leadership positions, including as president of the National Tribal Chairmen’s Association.⁵⁸ Martin’s goal was always to make the Choctaw and other tribes self-sufficient. He saw economic development as the key to this goal. While addressing a college campus, a student asked Martin if his focus on economic development was undermining Choctaw culture. Martin calmly responded, “Well, it used to be that everyone moved away, but now they’re all coming back.”⁵⁹

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Not every tribe will become an economic powerhouse like the Mississippi Band of Choctaw Indians. Not every tribe wants to. But every tribe wants their citizens to be safe and have economic opportunities. Neither the state nor the federal government should impede tribes in their quest to make life better for their citizens. Liberating tribes from the control of outside governments is essential for tribes to escape their “dependent” status and become sovereign governments.