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

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.