New Verse, But Same Old Song

Thread: Indian Gaming in the News

States trying to tax tribes is an American tradition. The general rule is that states cannot tax tribal governments (though the U.S. Supreme Court has carved out exceptions), and the express rule in IGRA is that states cannot tax tribal gaming. But that doesn't stop them from trying.

And it doesn't mean that states receive no tax benefits generated by tribal gaming; they indisputably do, either directly (such as state income tax paid by tribal casino employees) or indirectly (such as state tax paid by businesses that contract with tribal casinos).

The most obvious "tax" on Indian gaming is direct payments to the state. According to the U.S. Interior Secretary, tribal-state revenue sharing doesn't count as an illegal tax under IGRA if the tribe receives some benefit from the state, such as exclusivity in a gaming market. The first revenue sharing agreement was between the Mashantucket Pequots and Connecticut, in which the tribe agreed to pay the state 25% of its slot machine revenue in exchange for the exclusive right to operate slots in the state. (The agreement later was modified to allow slots, at a similar price, at the Mohegan Sun.) That translates into a whole heck of a lot of money going to Connecticut -- some $200 million a year.

Apparently, though, it's not enough. The town of Ledyard is trying to tax the slot machines that the Pequots lease from a vendor, rather than own outright. The town claims that it is owed $10,758 in taxes on the slots. The vendor and tribe are challenging the town's taxation, claiming that it interferes with the tribe's gaming operations and thus violates IGRA's prohibition against state taxation of Indian gaming.