December 8, 2011

Indian Affairs Oversight Hearing Explores the Effect of Tax Policy on Economic Development

Washington D.C. –
U.S. Senator Daniel K. Akaka (D-Hawaii), Chairman of the Senate Committee on Indian Affairs, held an oversight hearing today to examine how state and federal tax policies significantly impact the development of new markets in Indian Country.
As sovereign nations, tribes possess inherent governmental powers, including the power to tax. This power allows tribes to tax all transactions occurring on Indian lands held in trust, including business conducted by non-tribal members. However, tribes often compete for the same tax base with federal and state governments.
“Sound tax policy has the potential not only to sustain local economies, but to help them grow into vibrant job creators. This is especially true for tribal communities, who have found themselves suffering the worst in the American economy,” said Senator Akaka.
During the hearing witnesses voiced concerns that the problem of double taxation has discouraged business on tribal lands and ultimately inhibits economic development.
“Everything the tribal government does is for the purpose of helping its members and its employees. Double taxation hinders the tribe’s ability to act in promotion of these interests,” said Peter Ortego, General Counsel for the Ute Mountain Indian Tribe. “When tribal activities are unencumbered by state and federal taxation, then the tribe can best determine how to receive compensation for the services it provides.”
“The federal government plays a critical role in shaping tribal and state tax policy in Indian Country. The government is dedicated to promoting tribal self-government and economic development in Indian Country, and its tax policies for Indian Country can help fulfill those objectives,” said Steven Gunn, attorney and law professor at Washington University.
Several laws have been enacted by Congress over the past three decades to provide tax incentives to attract economic development opportunities to Indian Country. The New Markets Tax Credit Program, for instance, has provided assistance to the Fort Bois Band of Chippewa Indians to build new government buildings, housing tracks and a community services center.
“The New Markets Program reduced the cost of borrowing for a project that some lenders have usually considered to be high on risk and short on collateral because it was located on tribal trust land within the Reservation. We could not have financed these projects without it,” said Kevin W. Leecy, Chairman of the Bois Forte Band of Chippewa Tribe.
“Economic development and self-sufficiency are being further hindered by the Supreme Court’s Carcieri v. Salazar decision, which reversed 75 years of policy and practice, and created two classes of tribes: those that can have lands taken into trust and those that cannot,” said Akaka.
“It is important that we identify tax policy tools that promote—not harm—tribal economic development and it is important that we remedy Carcieri once and for all,” said Senator Akaka.
Contact: Emily Deimel
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