The Importance of Being Interest: Why a State Cannot Impose its Income Tax on Tribal Bonds

Scott A. Taylor, University of St. Thomas

Abstract

The exercise of a state power in a way that adversely impacts the sovereignty of a federally recognized Indian tribe has been a matter of serious concern to the United States Supreme Court since the early 19th century. The limit of a state’s power to tax tribes is very often the subject of this judicial concern. In this article, I examine the reasons why states cannot impose their income taxes on interest that investors earn on tribal bonds.