San Diego Business Journal

Recall Issue: Should the State Tax Indian Casinos?
Gaming: Despite Candidates' Claims, Tribes Say They Are Sovereign , And Exempt


One controversy that has emerged in the California governor's recall race one among many is whether Indian enterprises should be taxed.

"Their casinos make billions, yet pay no taxes and virtually nothing to the state," said gubernatorial candidate Arnold Schwarzenegger in a recent television ad.

Indeed, the National Indian Gaming Commission estimates in 2002, California casinos brought in roughly $3.5 billion. The figure is inexact since the survey includes two Indian casinos in Nevada.

Long before Schwarzenegger publicly crossed the line from actor to politician, the Indian gaming community had a counter-argument:

This isn't business revenue, they said.

This is government revenue.

Tribes argue that governments do not tax other government agencies' revenues.

The Viejas Band of Kumeyaay Indians, which runs a casino in Alpine, makes its taxation case in a document called "Tribal Government Gaming: Myths & Facts."

"Indian tribes are governments with responsibilities to their citizens, but tribes often lack an economic base to levy taxes to fund the needs of their people," the document says.

"Some tribes have found gaming a means to generate revenues to operate their government and to provide jobs and economic activity on their reservations. As sovereign governments, tribes do not, like states and municipalities, pay taxes on their revenues to any other governments. Yet, there are continuing attempts by misguided federal lawmakers to impose taxes upon tribal government gaming revenues, a practice that probably would be declared unconstitutional."

Viejas made headlines in early September when it pledged $2 million of direct and indirect support to the gubernatorial campaign of Lt. Gov. Cruz Bustamante, the top Democrat on the Oct. 7 ballot.

Explaining Compacts

In his ad, Republican Schwarzenegger criticizes opponents who take money from Indian tribes, and notes that "other states require revenue from Indian gaming."

That situation, though, is due to existing, long-term agreements between the states and the tribes.

The agreements are called compacts.

The federal Indian Gaming Regulatory Act of 1988 requires tribes that have slot machines and card games to enter compacts with their state governments.

The bulk of California casinos have compacts negotiated in 1999. Those deals do not require Indian casinos to share their revenue.

Then came the state budget crisis, and Gov. Gray Davis called on California casinos to provide the state with a cut of their revenue.

Davis has also signed new compacts with the La Posta and Santa Ysabel tribes. These differ with the 1999 compacts in that they require some revenue sharing.

Sovereign Issue

The idea that tribes are sovereign nations drives a lot of the law surrounding Indian casinos.

It's the reason casinos do not require state environmental impact reports.

Viejas, in its document about taxes, makes an appeal to individual responsibility.

"All American Indians pay federal income, FICA and Social Security taxes," it says.

"Most Indians also pay state income and property taxes. Only the small percentage of Indians who live and work on their own federally recognized reservations similar to soldiers and their families living on military bases are exempt from paying state income and property taxes.

"However, Native Americans still pay federal income tax and most sales taxes. Tribal members living off of reservations are required to pay all federal, state and local taxes."

Here is a quick look at the diverse casinos along the North County corridor:

- Harrah's Rincon Casino & Resort

Rincon San Luise & #324;o Band of Mission Indians

56,000-square-foot Casino

1,600 Slot Machines

35 Table Games

201 Hotel Rooms

1,300 Employees

- Pala Casino, Resort & Spa

Pala Band of Mission Indians

185,000-square-foot Casino

2,000 Slot Machines

77 Table Games

507 Hotel Rooms

Eight Restaurants

Conference Facilities


1,800 Employees

- Casino Pauma

Pauma-Yuima Band of Mission Indians

35,000-square-foot Casino

750 Slot Machines

22 Table Games

Caf & #233; and Deli

500 Employees

Soon to be Caesars Pauma with a 500-room hotel and several restaurants

- Valley View Casino

San Pasqual Band of Diegue & #324;o Indians

28,000-square-foot Casino

1,200 Slot Machines

12 Table Games

Bar and Buffet

500 Employees

- La Jolla Arcade

30 Slot Machines

Gas Station and Convenience Store

- Pechanga Resort & Casino

(Southern Riverside County)

Pechanga Band of Luise & #324;o Indians

75,000-square-foot Casino

2,000 Slot Machines

86 Table Games

522 Hotel Rooms

Seven Restaurants

Meeting Facilities

3,100 Employees