Sacrificing Sovereignty: How Tribal-State Tax Compacts Impact Economic Development in Indian Country

Economic development is a critical component of tribal sovereignty. When a state asserts taxing authority within Indian Country, there is potential for overlapping, or juridical, taxation over the same transaction. Actual or even potential juridical taxation threatens economic development opportunities for tribes. For many years, tribes and states have entered into intergovernmental agreements called tax compacts to reduce or eliminate juridical taxation.

Existing literature has done little more than mention tax compacts with cursory cost-benefit analyses of the agreements. This is the first Article to critically examine the role tax compacts serve in promoting tribes’ economic development. This Article analyzes economic development activities in Indian Country as two types of transactions: when the tribe or tribal enterprise is engaging as a retailer, and when a tribe or tribal enterprise is working with non-tribal entities in joint ventures. Using these categories of transactions as a framework, and looking to existing compacts between various tribes and states as examples, the analysis focuses on the impact compacts have on economic development in Indian Country.

This Article argues that compacts do not live up to the promise of resolving juridical taxation in a manner that fosters economic development opportunities for tribes.