![]() This gave all federally recognized tribes access to a national cap of $2 billion to issue tax-free debt obligations in the same manner as states and local governments. In fact, as part of a Great Recession-era stimulus package, the federal government ran a pilot program, called the Tribal Economic Development (TED) bonds program. The lack of involvement in tax-exempt bond finance is not because of the lack of potential investments in Indian Country. Source: The Bond Buyer’s 2015-2020 Year In Statistics Inflation Calculator from. Figure 1: Differences in Tax-Exempt Government Bond Issuances, 2014-2020įigure notes: Calculations constructed by authors. This equates to a 559-fold gap in the usage of tax-exempt government bonds. Using data from 2014 to 2020, state governments issued a total of $47 billion annually in non-taxable municipal bonds, compared to a total of $84 million annually by tribal governments. ![]() The stark difference in the utilization of tax-free debt obligations between state and tribal governments is shown in Figure 1 below. (The lone exception was for the construction of manufacturing facilities.) These restrictions are especially onerous on tribes since, unlike local governments, tribes cannot levy property taxes on land held in trust and, as a result of Supreme Court rulings, even when land is owned privately on a reservation, property tax revenues flow to local governments. tax code restricts the use of non-taxable tribal government bonds to only “essential government functions.” This effectively narrows the set of eligible projects to those typically financed by states through tax revenues, and it prohibits the use of tribal private activity bonds. Starting with the passage of the Indian Tribal Government Tax Status Act in 1982, which was later amended in 1987, the U.S. These bonds benefit the public by building economic infrastructure without raising taxes.įor decades, however, tribes have been effectively shut out of the ability to issue both non-taxable government bonds and private activity bonds. ![]() In addition, these governments can issue non-taxable private activity bonds, which let the benefits of low-cost borrowing flow directly to the private sector-provided that these bonds are used on specific projects such as airports, educational facilities, and affordable rental housing. State and local governments use sizable amounts of tax-free debt obligations (i.e., municipal bonds) to supply public goods such as highways, bridges, and parks, along with private goods such as hotels, golf courses, and sports stadiums. Barrier #1: Tribal Access to Subsidized Financing In this short article, we summarize three distinct ways in which tribes have been shut out of tax-based economic development tools that are readily available to state and local governments. This lack of parity is especially harmful today, as recent research shows that the COVID-19 pandemic has crippled tribal government revenues and disproportionately impacted American Indian and Alaska Native age-adjusted mortality and prime-age employment. Yet, unlike these sub-national governments, tribal governments face hurdles when accessing even the most basic forms of public finance tools. Consistently overlooked and largely underappreciated, the responsibilities of tribal governments mirror those of state and local governments. As a result, state and local governments use an artillery of public finance tools such as subsidized borrowing and tax incentives to spur development. ![]() Fiscal capacity-which allows governments to deliver programs and services such as health care, education, workforce development, and law enforcement-is also a product of growing economies. Economic development benefits communities through job growth, higher standards of living and improved subjective well-being.
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