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Double Taxation Entrenchment

DISCUSSION

Mapping Tribal-State Taxation Compacts and State Statutes

Lauren van Schilfgaarde

Discussant: Aviv Caspi

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Paper in one slide

262

tribal-state compacts

370

state statutes

97

regulations

QUESTION

Do compacts remedy the double taxation that Cotton Petroleum permits?

FINDINGS

  1. Doctrine reappears as contract terms.
  2. Statutes and regulations set most terms before negotiation begins.
  3. Terms are uniform within a state and differ across states.
  4. Most compacts beat the Cotton Petroleum default. Tribes pay for each gain with parity or state collection.

PROPOSAL

Territorial tax authority for tribes, modeled on California Regulation 1616.

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Which tribes sign compacts?

SUGGESTION 1

MOTIVATION

Tribes sign compacts when it beats its outside option.

Selection should place signed compacts above the baseline.

PROPOSAL

Build a tribe-by-tax-category table. Report the share of tribes with a compact in each category.

Compare tribes with and without compacts on enrollment, distance to a metro area, and gaming revenue.

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Why are some compacts more generous than others?

SUGGESTION 2

MOTIVATION

The paper documents wide variation in tribal shares across states and commodities.

Collection is one candidate explanation. A state's right to tax differs from its ability to collect.

Oklahoma Tax Commission v. Citizen Band Potawatomi (1991)

The state may tax sales to nonmembers. Sovereign immunity bars a suit against the tribe to collect.

Wagnon v. Prairie Band Potawatomi Nation (2005)

Kansas taxed the off-reservation distributor that supplied the tribe's station.

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Test whether collection explains the terms

SUGGESTION 2

PREDICTION

The tribal share is higher where collection requires the tribe (paper says this about New Mexico's 75% remittance on internet sales)

PROPOSAL

  1. Code the point of collection in each compact (e.g. retailer, distributor, remote seller)
  2. Compare tribal shares across collection points within a state.

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When is rate parity a concession?

SUGGESTION 3

MOTIVATION

The paper discusses parity as a price tribes pay for other terms.

Parity can also prevent a race to the bottom! Neighboring governments that compete for the same shoppers cut rates, and both lose revenue.

In Kanbur and Keen (1993), a minimum rate raises revenue for both jurisdictions. Full harmonization costs the smaller one. The paper codes both forms: 19% of records set a floor and 27% require exact parity.

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Separate the rate rule from the revenue split

SUGGESTION 4

Parity, and the state keeps the revenue

The tribe gives up its price advantage and receives little in return. This is the concession the paper describes.

Parity, and the state exits

Both governments avoid a rate war. The tribe collects the entire tax. California Regulation 1616 and the Nevada cannabis compacts take this form.

PROPOSAL

Treat parity as a coordination mechanism as well as a cost. Cross-tabulate parity clauses with revenue terms, and report the tribal revenue share for each group.

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