- Do Indians pay taxes?
- Do tribes themselves pay taxes?
These are common questions that people ask. The truth is American Indians do pay taxes just like any other Americans.
 
 
 

Tribes & Taxes*
     
 

All Native Americans pay federal income, FICA and social security taxes. Only the small percentage of Indians who live and work on their own federally recognized reservations, not unlike soldiers and their families living on military installations, are exempt from paying state income and property taxes. However, they still pay taxes such as sales and all other special and excise taxes.

Federal, state, and local taxes claim roughly a third of revenue generated in the United States. Increases in economic activity expand the tax base and increase government revenue. Indian gaming generated just under 553,000 jobs nationwide in 2004.


The wages associated with these jobs generate Federal, state, and local payroll, income, and other taxes and help reduce welfare payments and unemployment benefits, freeing up more revenue for the Federal and state and local governments. Wages paid to employees of Tribal governments and economic development enterprises amounted to just over $6 billion, and approximately $12 billion generated indirectly by Indian gaming.

The $18 billion in wages generates about $2.7 billion in federal income taxes and just under $2.8 billion in Social Security taxes. Thus, in 2004 Indian gaming increased federal tax revenues by $5.5 billion. In addition, the federal government also saved an additional $1.4 billion in reduced welfare payments and unemployment benefits. As a result, Federal treasury revenues increased almost $6.9 billion in 2004 due to the increased economic activity generated by Indian gaming.1

Indian gaming in 2004 also generated an additional $1.8 billion in revenue for state governments through state income, payroll, sales and other taxes and direct revenue sharing payments. Indian gaming generated an additional $100 million in local taxes and revenue through increased sales and other taxes and governmental services agreements.2

As for tribal governments themselves, under federal law, tribal government gaming cannot be taxed like a business. The tribal governments own the facilities. Like the California lottery, which does not pay taxes on its revenues because it is owned by the state, Indian casinos don’t pay taxes because tribal governments own them. Governments cannot tax other governments.

* Courtesy Nation Indian Gaming Association

1. Assumes that 7.65% were for the employer portion of Old-Age Survivor, Disability and Hospital Insurance taxes and 10% were in the form of fringe benefits. Federal personal income taxes, which are 15% of, wage income. Federal FICA taxes, which are 15.3% of, wage income. The decline in Federal unemployment benefits was estimated under the assumption that half of the people finding jobs because of the impact of Indian gaming were previously unemployed, and would have received benefits of $5,000 per year. Thus the total increase in employment is multiplied by $2,500 to determine the decline in unemployment benefits paid by the Federal government.

2. State income taxes are calculated by taking the ratio of state income tax collections for all states to the Bureau of Economic Analysis (BEA) estimate of personal income for each state. For this project NIGA used 2.7% for Indian gaming and 3.6% for non-Tribal businesses. The Indian gaming rate is lower than the non-Tribal businesses because Tribal members who live on their own reservations and work for the Tribe is exempt from state income taxes. State sales and excise taxes are calculated by taking the ratio of state sales and excise tax collections, including license fees, in each state to the estimate of personal income for all states made by the BEA. For this project NIGA used 5% overall for the state sales & excise tax rate.