MCCLANAHAN v. ARIZONA STATE TAX COMMISSION
Rosalind McClanahan was a member of the Navajo Indian nation who lived on the Navajo Reservation in Apache County, Arizona. Her employer withheld $16.20 in 1967 for Arizona state income taxes. McClanahan sought the return of her withheld income. She claimed that since she was a Navajo Indian residing on the reservation and since her income was derived completely on the reservation, she was exempt from state taxation. When her request was denied, she filed suit in Apache County Superior Court. The Superior Court dismissed her claim. The Court of Appeals of Arizona affirmed the dismissal. The Supreme Court of Arizona rejected her petition for review.
Did the State of Arizona have a right to tax Navajo Indians residing on the Navajo Reservation if their income is entirely from reservation sources?
No. In a unanimous decision, the Court reversed the decision of the Arizona Court of Appeals and held that Arizona did not have the right to tax McClanahan. In an opinion authored by Justice Thurgood Marshall, the Court emphasized the long-standing status of Indian reservations as exempt from state authority. While the Navajo Treaty signed between the Navajo nation and the United States did not explicitly exempt the nation from state laws, Arizona entered the Union on the explicit condition that it would lose its authority over Indian tribes and reservations within the state, including taxation powers. Consistent with its decision in Warren Trading Post Co. v. Arizona State Tax Commission, the Court ruled that Arizona "had no jurisdiction to impose" state income tax on McLanahan.
Argument of Robert B. Collins
Chief Justice Warren E. Burger: Mr. Collins.
Mr. Robert B. Collins: Mr. Chief Justice and may it please the Court.
This case is here on appeal from the state courts of Arizona where appellant filed suit to recover state income tax withheld from her income.
She claims that the state has no jurisdiction to collect its state income tax from her on a ground that she is a Navajo Indian who at all relevant times live and worked within the boundaries of Navajo Indian reservation.
The State Courts of Arizona denied her claim despite an unbroken line of decisions by this Court that States have no jurisdiction over the reservation affairs of Indians.
This Court first interpreted the constitutional relationship between the States and Indian tribes in 1982 in the case of Worcester against Georgia.
Mr. Chief Justice Marshall’s opinion reviews in detail the constitutional provisions that relate to Indians and concludes that plain area authority over Indian is conferred by the Constitution on the Federal Government and at state laws can have no force or effect on Indian reservations.
Subsequent decisions of this Court modified that decision in one area where the referrals of non-Indians only are involved on an Indian reservation and where the Indians were not directly involved at all.
In addition, Congress has exercised its plain area authority on certain occasions to grant to the States authority over reservation Indians.
Unknown Speaker: Mr. Collins, orient me a little bit as, are there vest sums involved in this test case or the mainly principal that we are talking about?
I realize how important the principal is.
Mr. Robert B. Collins: Your Honor, the actual amount of tax that appellant sought to regain was $16.20.
Unknown Speaker: Yes, but are there other sums that other taxpayers are concerned with?
Mr. Robert B. Collins: Your Honor, she filed the action as a class action that never reached any decision as to whether it was properly a class action under state procedures in the State of Arizona.
I’m sure that the court decision bears on -- on thousands of Indians in the State of Arizona.
Arizona nearly a hundred thousand Indians, most of them live on reservations.
I think it affects them all.
Unknown Speaker: Does the record show precisely what her work was that produce the income that was taxed?
Mr. Robert B. Collins: I don’t believe so, Your Honor because the matter was decided on the motion o dismiss.
The complaint stands alone as an allegation of fact.
She works for a bank on the reservation.
I don’t know that -- that’s in the record.
Unknown Speaker: One last question on the -- has the tribe itself ever levied an income tax on the members of it?
Mr. Robert B. Collins: No, Your Honor.
The tribe has a sales -- when effect to sales tax, but has no income tax.
Unknown Speaker: Thank you.
Mr. Robert B. Collins: The decisions of this Court where summed up in the only treaties on Indian law ever produced by Mr. Felix Cohen in 1942.
He stated, “State laws generally are not applicable to tribal Indians on an Indian reservation except for Congress as expressly provided that state law shall apply.
It follows the Indians and Indian property on an Indian reservation, are not subject to state taxation, except by virtue of an expressed authority conferred upon the State by act of Congress.”
It is our contention that rule applies here that Arizona has acted in contravention of that rule and that this Court should reverse on that account.
Now that rule doesn’t apply to all Indians.
There are Indians who were never placed under federal protection, never got a reservation.
There are other Indians over whom the federal protection has been ended by Congress beginning with Oklahoma in the late 19th century.
But, the Navajos are still fully under federal protection.
In 1868, United States entered into a treaty with the Navajos under which the Navajos agreed to peace under the protection of United States and the reservation was set aside for their exclusive use.
The treaty specifically provides that outsiders cannot enter the reservation without permission of the Navajos with the exception of federal agents.
In 1912, 44 years later Arizona was admitted to the union.
However, the United States honored is treaty commitment to the Navajos by conditioning that admission in the Arizona Enabling Act on the expressed ground that Arizona agreed the reservations Indian affairs remain under the exclusive control of Congress.
In 1949, Congress passed a Bill which would have ceded concurrent authority over reservation Indians in Arizona to -- over the Navajos to the State of Arizona.
But President Truman vetoed the Bill expressly because he objected to that provision, and today the Navajos have a comprehensive tribe government which rules territory in three different States.
It has a full court system that adjudicates all civil matters arising between Indians on the reservation and all misdemeanors as to Indians on the reservation.
It has an appellate court the rules as to questions of law as does this Court.
It has a bar with Navajo advocates who practice before the courts.
It has its own police system.
It has many regularity functions that deal with the things that the -- are important to the Navajo people such as stock raising, business licensing, and alike.
A long list of regularity services are provided by state government -- by the tribal government that are comfortable to those provided by state and local government elsewhere.
We detail this in our reply brief and it does tax its people.
There is a gross receipts tax on sales on the reservation in effect to sale tax.
The governmental functions on the reservation that are not tribal are by enlarged federal.
All healthcares delivered by the Federal Government to the United States Public Health Service.
Roads are built by Federal Government and so forth.
The Navajos are poor the federal services are important to them at this time.
Now, we have argued three grounds independent legal grounds for reversal of this case.
I intend to address myself essentially to one of them.
The one set out really in Mr. Cohen’s role that I recited earlier.
That this --that dispute focuses on the 1959 decision of this Court in Williams against Lee.
That case also involved the Navajo Indians.
In that case, a non-Indian brought suit against a Navajo couple in the state courts of Arizona based on a reservation incurred debt.
The Navajos moved to dismiss in the ground that the tribal government alone had jurisdiction over the cause of action.
The Arizona Supreme Court denied that claim ruling that because no act of Congress expressly forbad the state court jurisdiction.
The state court must have jurisdiction.
That’s the very claim Arizona makes here.
We are just having a renewal of the same dispute.
In that case, this Court reversed, unanimously reversed the Arizona Supreme Court in an opinion which forcefully renewed the federal protection over reservation Indian governments.
This Court referred to the treaty between the Navajo people and the federal government in these terms, “Implicit in this treaty terms was the understanding that the internal affairs of the Indians remain exclusively within the jurisdiction of whatever tribal government existed.”
Now, the court went on to acknowledge that decisions of this Court had applied state laws in Indian reservations to the affairs of non-Indians and recited the cases were that have been done.
And to that extent that the old case of Worcester against Georgia had been modified.
However, in the very same sentence, the Court said, “The basic policy of Worcester has remained.”
In other words, the policy that the affairs of the Indians themselves on the reservation are under exclusively federal and tribal authority.
This Court also emphasized the meticulous control which Congress has exercised over the years of the reservation Indian affairs.
The Court stated that Congress had acted consistently upon the assumption that the States have no power to regulate Indian affairs on reservations and that when Congress has wished the States to exercise the power, it is granted them the jurisdiction which Worcester against Georgia denied the States.
Now, in the phase of this unbroken string of decisions, the Arizona court below essentially tried to avoid the affect of the decision on two grounds.
First, the court below dealt with this Court’s decision in Williams against Lee by distinguishing -- creating a distinction I would say between the affairs of the Navajo tribe and the affairs of individual Navajo Indians.
The court seems to say that if the state invasion does not cripple the tribal government, that is okay.
However, this Court has, in many occasions ruled that affairs of individual Indians on reservations are subject to the jurisdiction of the tribe and not the States.
In the Kansas Indians a 19th century case, this Court expressly ruled that the State of Kansas could not tax individual Indians -- in the state -- in that state.
The affairs of the tribe were not involved at all.
Justice William H. Rehnquist: Well, what kind of a tax was Kansas trying to levy there, Mr. Collins?
Mr. Robert B. Collins: That was a property tax, Your Honor.
Justice William H. Rehnquist: Property tax?
Mr. Robert B. Collins: Yes.
In a much more recent case, I think they were both personal and real property in that case.
In a much more recent case, in Kennerly against District Court of Montana, the Montana District Court, excuse me, the Montana Supreme Court made the same sort of ruling.
It said that a personal debt of an individual Indian is not a tribal affair.
This Court overruled that decision in this Court’s opinion in Kennerly against District Court of Montana.
And of course, Williams against Lee itself really involved the personal affairs on an Indiana.
The tribe wasn’t a party to the case.
All the tribe did was provided a court where the Navajo contended the manner should have been heard.
Now, the -- the language in this Court’s opinion in Williams against Lee that Arizona relies on is what the briefs refer to as the infringement test.
In reads the question has always been whether the state action infringed on the right of reservation Indians to make their own laws and be ruled by them.
We suggest that Arizona has badly distorted the meaning of that phrase.
Of course, the phrase begins with the question has always been.
It is not a new rule.
In other words, the Court was referring to the time honored rule that reservation Indians are entitled to govern their own affairs.
Furthermore, the court state makes their own laws and be ruled by them.
We suggest what that means is, the laws that Indians make rule rather than state laws.
Justice Potter Stewart: Are these opinion votes in Arizona elections?
Mr. Robert B. Collins: Yes, Your Honor.
Justice Potter Stewart: Are there any -- any reservation Indians in the Arizona State Legislature?
Mr. Robert B. Collins: There will be shortly, Your Honor.
Justice Potter Stewart: There have been in the past, ever?
Mr. Robert B. Collins: There has, I believe one -- one occasion that I know about.
They may have been more.
Justice Potter Stewart: And they are going to be -- want to more in the new legislation next month?
Mr. Robert B. Collins: Yes, sir.
That convinced us.
Justice Potter Stewart: So that while they have self-government.
They also participate in the government of the State of Arizona by exercising the elective franchise.
Mr. Robert B. Collins: That’s -- that’s correct.
They do participate in the state government and there is a certain amount of interaction between reservation affairs and state affairs that has been authorized by Congress.
Our contention is it’s up to Congress to adjust that relationship.
It’s not up to Arizona that whenever Congress has wanted to adjust that relationship, it is done so in detail.
Congress has specifically said that States can -- can levy certain taxes against reservation Indians, but not the tax that’s as issue here.
And we suggest that that Congress I think can be appealed to with any question of adjustment of the relationship.
Chief Justice Warren E. Burger: Back in the days of Worcester against Georgia, they did not vote, is that a reasonable assumption?
Mr. Robert B. Collins: Yes, Your Honor.
They didn’t vote because they weren’t considered citizens.
Chief Justice Warren E. Burger: And no part then as Mr. Justice Stewart had just suggested in the governmental thing -- in the overall government.
Mr. Robert B. Collins: That’s -- that’s correct.
The Indian citizenship was granted by act of Congress in 1924, but since that time this Court has repeatedly rule on the question of federal protection over Indians and has repeatedly rejected the contention that citizenship ends the protection.
It is up to Congress to end it specifically and it hasn’t been done implicitly in some Act like the Citizenship Act.
The -- now the -- a subsequent decision of this Court in Organized Village of Kake against Egan, had a sentence in it which paraphrase some of the decisions of this Court in earlier decisions of this Court including Williams against Lee.
And that sentence has also been seized upon by the Arizona Court and some other state courts in an effort to infer the somehow the door is open to state application of their laws on Indian reservations.
We suggest that that sentence has been taken out of context and misread.
The Kake case involved Indians not on a reservation who had no comprehensive tribal government that did not rule any distinct territory and therefore was quite different from a Navajos.
And I think that --
Unknown Speaker: What is the extent of their claim, are they making the same claim if Arizona’s opt to the tax a reservation Indian on income earned outside the reservation?
Mr. Robert B. Collins: If the Indian income earned off the reservation, Your Honor, I think that the question would be one of what sometimes turn taxing -- termed taxing jurisdiction, a due process issue.
Unknown Speaker: Well, what would be -- what would your -- what would be your position?
Mr. Robert B. Collins: I think it would depend on the particular facts.
Taxing jurisdiction decisions to go into the question of a benefit burden theory of taxation, how much services are received and that sort of thing.
I think there such --
Unknown Speaker: You wouldn’t be making the argument you’re making here?
Mr. Robert B. Collins: No sir.
I would not.
I would not.
Unknown Speaker: You wouldn’t think your argument here would be valid in that case?
Mr. Robert B. Collins: I think that -- I think that the Indians based on the argument I’m making here would be entitled to the same kind of considerations as prevailed in -- in other cases where courts have considered taxing jurisdiction over nine residents essentially.
That kind of situation, I think those kinds of issues would govern that --that situation.
Unknown Speaker: And would -- and would -- would this argument cover a member of the tribal who leave off the reservation?
Mr. Robert B. Collins: No, Your Honor, not at all.
If the tribal member leaves off the reservation he is subject to state jurisdiction.
I think that settled long.
We’re not --we’re not suggesting otherwise.
Unknown Speaker: Even though -- even though her earns his income on the reservation?
Mr. Robert B. Collins: Well, that – that that just turns around the taxing jurisdiction question.
That makes the tribe have to justify its taxing jurisdiction, I think, if that occurred.
But those -- those cases involved the interaction of two taxing jurisdictions in the way where we have -- you know city’s taxing commuters and that kind of question of taxing jurisdiction.
There is a discussion of that issue and one of the amicus briefs, but I don’t think it’s relevant to the main question here.
Unknown Speaker: And as well as vote, does, is the -- does the state furnish various services to the tribe education or --
Mr. Robert B. Collins: The state furnishes a very minor amount of services to the tribe, Your Honor.
I lived in Window Rock on the reservation and the schools there --this is not in the record Your Honor, but it -- if this is a relevant issue we pointed out, the matter should be remanded because it is not a record as to either side.
But, I lived in Window Rock, the school budget in our school district where I live is about 20% state supported.
Unknown Speaker: Well the voting thing isn’t part of the record either?
Is it or isn’t?
Mr. Robert B. Collins: Well, that is a matter of decision of law in Arizona.
There is a decision of the Arizona courts that reservation Indians can vote in the state and that -- that is cited in the briefs.
But, I’d say it may be 10% of the support for education on the reservation comes in state sources overall, perhaps 10% of the source of welfare money.
That’s about it.
There aren’t many other state services of any significance on the reservation and furthermore, those reservations schools are educating non-Indians.
I mean I could have children on reservation schools and I pay state taxes.
This issue doesn’t concern me.
Justice William H. Rehnquist: And get any support for your schools on Apache County or Navajo County in addition to the state?
Mr. Robert B. Collins: There is a real property tax levy, Your Honor, that’s local.
There are real property interests on the reservation that are taxable.
Indian mineral production is taxable under the state system and Apache County administered that, but the source of money is all under reservation.
There isn’t any money that comes from off the reservations supporting reservations schools from Apache County.
Justice William H. Rehnquist: But does Apache County with whatever source it may have contribute something to the financing of schools on the reservation?
Mr. Robert B. Collins: Yes, it does Your Honor.
If you mean in the sense that Apache County derives money from reservation resources and reapplies it for reservation?
Yes, that’s correct.
I think that the importance of the difference between this case and the Court’s decision in Organized Village of Kake against Egan is shown by the fact that later on, this Court ruled in Warren Trading Post Company against Arizona Tax Commission that again the Navajos are entitled to self-government.
There were other issues in that case, but the Court distinctly renewed the commitment to the protection of the Navajos Government and of course the Supreme Court of Minnesota has ruled contrary to the Arizona Courts in a decision that we think was correct.
I think that the -- an important point is to consider the implications of the state’s position here on Indians themselves.
First of all, the state’s position, have they acknowledged that Williams against Lee is right, they have too.
It’s a decision of this Court.
Once it’s going -- they haven’t contended so far that it should be overruled.
Now, that means that sometimes they don’t have jurisdiction to apply their laws under reservation.
Now, they say sometimes they do and we have a constitutional question each time you decide.
Obviously, this is very productive of litigation.
I mean each case has to be taken to an appellate decision.
Well that’s not too serious a problem, but consider the situation, the uncertainty that’s created for reservation Indian.
Merely sitting there and he receives a letter from some State Bureau in Phoenix that tells him he must do something because state law requires it.
And he has to decide whether that state law under constitutional principles that they suggest to apply -- conflicts with his tribal law in some way or other.
Well, that uncertainty seems to me to be not warranted.
I don’t think this Court intended to create that kind of uncertainty when it decided Williams against Lee and that’s why we contend that Williams against Lee has been misread.
We suggests --
Chief Justice Warren E. Burger: We will resume at that point at 1 o’clock.
Mr. Robert B. Collins: Thank you, Your Honor.
Unknown Speaker: Military jurisdiction has always been based on the status of the accused rather than on the nature of the offense.
Chief Justice Warren E. Burger: Mr. Collins, you may continue.
Mr. Robert B. Collins: Mr. Chief Justice, may it please the Court.
At the time we adjourned, I was pointing out that the implications of Arizona’s position create great uncertainty for reservation Indians.
Each Indian must decide that his peril whether his particular situation -- in a particular situation applied to him whether the state law that’s being applied conflicts with tribal authority.
And the third implication of the state’s position is that under the word state views this law.
The state can pick and choose when to come on to the reservation.
We see them trying to tax where it’s to their advantage.
Congress offered the States in Public Law 280 the opportunity to assume a broad range of jurisdiction of some sort.
In return the States were to assume certain burden such as the burdens of manning the courts and police that had been born by the Indians in the Federal Government.
It’s clear that the Congress’ intent was that the -- that the burden of these services be born by the state and Arizona is attempting an avoidance of that -- of that intent of Congress.
Justice William H. Rehnquist: If Arizona had accepted the congressional offer, would that have authorized it to tax, do you think Mr. Collins?
Mr. Robert B. Collins: Justice Rehnquist, the -- that question I’m fully aware is the central question of the case to follow this one and I’m not certain the full reaches of Public Law 280.
Since it is going to be fully argued by competent counsel in that case, I prefer not to comment on.
But it just seems to me clear that in the absence of compliance with Public Law 280, it’s absolutely, (Inaudible) the jurisdiction to tax.
The full reach of that Act is important question and --
Chief Justice Warren E. Burger: If Congress has power to impose duties on the States in this area?
Now, what are the -- what’s the scope of that power if it has that power?
I get that (Inaudible) Congress they can fine the States to furnish these services, the same time without to tax?
Mr. Robert B. Collins: I think that if -- I think that what Congress does is Congress in by virtue of its protection of the Indians provides substantial services are quite large services which are detailed in this Court’s opinion in Warren Trading Post Company against Arizona Tax Commission.
But Congress has suggested in certain cases, Public Law 280 is one example on the termination laws in the 1950 or another that federal protection be withdrawn, but that leaves the Indians as ordinary citizens of the state with no federal protection, no federal services, that means the States have to provide normal services to them that they are not now providing.
In that sense, the Congress can impose the duty on that States, yes.
Justice William H. Rehnquist: Mr. Collins, I believe one of the state’s contentions is that if we accept your proposition here that Indians at least for this purpose are a discrete group who are not subject to state taxing power, then when the Indians are seeking the benefit of the Equal Protection Clause to assert that the state has treated them in a discriminatory manner, logically the state could say, well you know more less by their own choice.
They are different and we can treat them differently.
Do you have any response to that?
Mr. Robert B. Collins: Your honor, I think that -- I think that the economic relationship between the tribes and the States is controlled by Congress.
I think on the other hand, Congress has made Indian citizens of the States and they are entitled to the right of citizens.
This has gotten into detail in our reply brief to which I refer for a complete answer, but our position is that there might be some question about that.
The Federal Government provides broad services if those were withdrawn, the equities might be grossly altered, but everything stands the states provide very good services to the Navajos.
The state has limited taxing authority for the Navajos.
The economic thing is in pretty balance.
I think the state is trying to upset that.
I think that if a radical change were coming and has to come from the Federal Government because it’s the Federal Government that is providing the services to keep that economic situation in balance.
And it’s up to Congress to change this.
It’s up to Congress to order the arrangement.
But I do answer question, yes.
I think that they are citizen of the states and entitled to the rights of citizens.
Justice Potter Stewart: Your theory is this, basically one of the -- a preemption that I suppose in the sense.
Isn’t a federal instrumentality theory or anything like that?
Mr. Robert B. Collins: I think preemption would be the proper word, Your Honor, yes.
Justice Potter Stewart: They just occupied the field and that thrust of the law is that the state shouldn’t burden?
Mr. Robert B. Collins: I think the thrust of --
Justice Potter Stewart: It’s a statutory.
It’s a purely a result of federal statutory law?
Mr. Robert B. Collins: No, Your Honor.
I think it’s the Constitution.
I think that Worcester against Georgia rules that under the Constitution, Indians affairs are preempted by the Federal Government.
Now, the courts have subsequently ruled --
Justice Potter Stewart: Well, yes but -- and it’s beyond the power of the Congress to – well, it couldn’t be beyond the power of Congress to submit in the state law.
Mr. Robert B. Collins: No, sir.
Congress can -- I agree with that.
Congress has the power to see jurisdiction of the states and has repeatedly and in detailed then so, I think Mr. Sachse for the United States is going to elaborate on some of the particular laws that are relevant here, but --
Justice Potter Stewart: Well, it’s also constitutional in the sense of supremacy?
Mr. Robert B. Collins: I believe, Your Honor that – that the court’s opinions have referred to several constitutional provisions.
The Indian Commerce Clause, the Treaty Power and Supremacy Clause are combined leading to the rule of Worcester against Georgia.
Justice Potter Stewart: Would you like the same argument here with respect to inheritance taxes?
Mr. Robert B. Collins: State inheritance taxes, yes I would.
Justice Potter Stewart: And distinguished the Oklahoma case on the grounds that non-reservation Indians were involved there?
Mr. Robert B. Collins: Non-reservation Indians and Indians receiving full services from the state where involved in those cases and that’s -- that’s all the difference in the world, if they’re not on reservation, they’re not entitled to the protection of the federal treaty and so forth.
Justice Potter Stewart: But the -- are there any Indians on reservation that don’t have time for government?
Mr. Robert B. Collins: A few I think, in very small reservations, Your Honor.
Justice Potter Stewart: Would you make the same argument about them?
Mr. Robert B. Collins: I think that it’s open to contention that some of this Court’s decisions have depended on their being a tribal government in existence.
I’m not sure how they would apply it.
It happens in fact that most of the small reservations are now under Public Law 280 and are governed by that law specifically.
Arizona has never complied with Public Law 280 and the States that have not are ones are States with large reservation with tribal departments by enlarge.
So, I’m not sure that question exist in reality, but --
Justice Harry A. Blackmun: Well, I’m just trying to find out whether your theory has nothing do to with the -- withdrawing up resources for tribal government?
Mr. Robert B. Collins: Yes, Your Honor, it definitely does.
I mean the Navajo Tribe is quite interested in this case to file a brief in support of the jurisdiction --
Justice Harry A. Blackmun: Well, if there was no tribal government the question might be different then?
Mr. Robert B. Collins: It might be.
I would suppose it might be.
I’m not sticking it if the -- that’s the question I can’t answer definitely.
In conclusion, we just -- we want to urge that we’re not asking for a change on the law.
We’re asking that this Court reaffirmed it’s historic commitment to the self-government Indian reservations and further more that this Court and the uncertainty that has been created by what Arizona has done in a couple of other States in trying to interpret other decisions of this Court as allowing this invasion of the Indian jurisdiction.
We’re talking about what we contend is a settled area of jurisprudence.
The prior decisions of this Court and acts of Congress make it clear that the Arizona court below was wrong and should be reverse by this Court.
Chief Justice Warren E. Burger: Thank you, Mr. Collins.
Argument of Harry R. Sachse
Mr. Harry R. Sachse: Mr. Chief Justice and may it please the Court.
The United States agrees with Mr. Collins’ position in this case.
I want to try to clarify the position as we see it and then to emphasize the amount of the congressional activity that has been in this area of the law and the impropriety of allowing a state unilaterally to obtain jurisdiction within an Indian reservation where Congress has not authorize the state to obtain that jurisdiction.
In our view, it’s been the law for many years that in the absence of a congressional authorization that -- some situations are consent of the tribe itself.
State laws including state tax laws, not limited to state tax laws including state tax laws have no applicability to Indians within an Indian reservation.
This has been the literally hornbook law as we point out in our brief with the quotation to Mr. Felix Cohen’s hornbook.
It also is the -- in our view the real holding of Williams versus Lee, what’s happened is that the court in the Kake case which had nothing to do with tribal -- with reservation Indians had to make a one sentence paraphrase of Williams versus Lee.
And the Arizona court has seized on that one sentence paraphrase to try to make Lee as one of the amicus to put it to turn it on its head and make Lee be a decision that allows the states to act without congressional authority within an Indian reservation, whereas in fact the Lee decision was exactly the opposite.
The language that I think is the clear statement of Lee is opinion of this whole case of course.
The opinion of Justice Black at page 220 of 358 U.S. which Justice Black said, “Congress has acted consistently upon the assumption that the States have no power to regulate the affairs of Indians on a reservation.”
And Justice Black cites four, five statutes that based on this assumption and concludes significantly when Congress has wished the States to exercise this power.
It has expressly granted them the jurisdiction which Worcester versus Georgia had denied them.
I think that’s a sound basis for the decision in this case and if we adopt the view of the Supreme Court of Arizona, it would be opening up a can of worms as to what laws do and do not apply to Indians within Indian reservations.
Now, I want to use the time that I have to bring to the Court’s attention a number of individual statutes where Congress has chosen whether state law should apply within Indian reservations and to emphasize particularity with which Congress has acted in this respect.
I’ll start with tax laws, but it pictures equally clear with general laws.
Unknown Speaker: Mr. Sachse, why take it then that your position is based primarily on statutes rather than the Constitution?
Mr. Harry R. Sachse: Our position is that the constitution gave Congress full authority over the affairs of Indians that Congress has exercised that authority, both through or the Congress and government through treaties and through setting up Executive Order reservations, that Congress further exercise the authority in the terms of Enabling Acts of the Western States that its further exercise that authority by from time to time providing small bits of jurisdiction for States within Indian reservations, and that there’s no room for -- sir.
Justice William H. Rehnquist: You say Congress -- the Constitution has given Congress a general authority over the affairs of Indian.
Would you say that Congress could prohibit a state from taxing or criminally dealing with a non-reservation Indian if it so chose?
Mr. Harry R. Sachse: I don’t know.
I don’t think so and certainly that issue is not presented in -- in this case.
I think that the first law that one would have to look at would be the Enabling Acts of the States and to see to what extent the States just claim jurisdiction.
Now, Congress has as Indians who don’t live on reservations held that-- that they can only be tried in federal courts in the 18 U.S.C. and defining Indian country doesn’t --
Unknown Speaker: Does your position make room for the state to tax non-reservation Indian?
Mr. Harry R. Sachse: Yes, it does.
Unknown Speaker: Income tax and inheritance tax?
Mr. Harry R. Sachse: Our -- the position that we think it’s correct is that as to reservation Indians.
You start with the assumption that state laws have no authority over those Indians at least as to matters, income that they’ve earned on the reservation.
As to non-reservation Indians, you start with the proposition that they can be tax like anyone else.
If they can show a particular statute that gives them a tax exemption, they then have a tax exemption.
For instance, some – many -- there are many non-reservation Indians who live on allotments.
And in Squire versus Capoeman, this Court held that the allotment creates a tax exemption.
Unknown Speaker: And that would go I supposed for reservation Indians earning income off the reservation, going off the reservation to work, state to tax that income?
Mr. Harry R. Sachse: I would think so.
I don’t know.
I don’t want to state a government position on that issue.
Certainly if the income is earned off the reservation is quite a difference case from this case.
Justice William H. Rehnquist: In Squire versus Capoeman was a federal – has federal income tax too, wasn’t it?
I mean it would not necessarily carryover to the state income tax.
Mr. Harry R. Sachse: No except in a fortiori sense that the Federal Government traditionally has had greater taxing powers over Indians than the states because there is no jurisdictional problem with the Federal Government.
There’s a jurisdictional problem with the state taxing Indians at least within an Indian reservation.
Justice William H. Rehnquist: When we say jurisdiction, would you be more precise about what you mean – here, I take it, it was the withholding from the Indians employer which was voluntary.
So the state is not asserting its process on the reservation.
Do you mean legislative jurisdiction?
Mr. Harry R. Sachse: Yes, sir.
I mean legislative jurisdiction.
I mean the application of state laws to Indians within an Indian reservation.
That is what I mean by jurisdiction.
The other jurisdictional problem could arise to if -- but were not a situation of the withholding tax if the state were trying to collect its tax from someone who had not paid it.
He then would have the question of the state collecting -- trying to collect the tax and --
Unknown Speaker: It’s a location plus being an Indian.
Mr. Harry R. Sachse: Plus tribal government.
Unknown Speaker: Plus tribal government, because non-Indians on the reservation you don’t have any problem with that?
Mr. Harry R. Sachse: Well, with non-Indians on the reservation, the situation as you know was presented in Kahn in the petition before the Court.
Now the Court has not acted on Kahn versus Arizona Tax Commission.
In our view, that is a much more difficult case.
If Worcester versus Georgia stood in its original strength then Kahn couldn’t be taxed either.
And if a reservation were an absolute federal enclave in which the state can have no authority against anyone including non-Indians, he couldn’t be taxed either.
But we admit that Worcester has been weakened to the point of allowing state jurisdiction where it applies solely to non-Indians within the Indian reservation.
So we -- I don’t know what I would do if I were the judge deciding the case or --
Unknown Speaker: Unless there were some specific federal statute that --
Mr. Harry R. Sachse: Unless there were some specific federal statute authorized and I think in the time that I have left which is not too much that I’d best mention a few of these special statutes.
For instance, in 1929, I believe it was, the Congress decided it would be a good idea to allow the state motor vehicle fuel taxes to apply to sales of motor vehicle fuel whether it was on any sort of federal reservation or not and whether it was sold even by a licensed trader or not, and specifically authorized that tax.
And from that date on without decisions of the court or any kind of serious problem, the states had been able to collect the motor vehicle tax on with congressional authority within Indian reservations.
In 1949, when Congress, at the time when military bases were being built around the country, 1940 actually, I believe it was.
When congress considered whether it wanted to allow state income taxes and state sales taxes to apply within federal areas where the debate on this Act which is called the Buck Act.
Debate on this Act was very clear that some congressmen proposed that it should apply within Indian reservations too.
The Department of the Interior objected to that and wanted to have Indian reservations totally excluded from the Act.
And the conclusion that Congress arrived at was to put in 4 U.S.C. 109 which says though the States may assess income tax within federal areas, these shall not apply to Indians not otherwise taxed which is the standard phrase for Indians living in the reservation or on Indian country.
Now, we do not say – we’re not trying to undo the footnote on the Warren Trading Post case.
It said the Buck Act did not apply to Indian reservations.
But if it doesn’t apply to Indian reservations it was a conscious choice by Congress that not to authorize the imposition of state income taxes to Indians within Indian reservations.
Similarly, Congress has authorized the taxation of mineral interests within Indian reservations but in doing so, it did it with particularity and only authorized the taxation of mineral interests on unallotted, tribally-held lands and then provided that the state taxes could not create a lien on the land.
And away from the area of taxation, I don’t think I need to discuss Public Law 280 here that of course, it is the basic statute in which Congress authorized states to exercise a broad jurisdiction that also with broad limits within Indian reservations.
But I want to point out this one particular statute, very limited statute that was cited in the Kake case, that’s 25 U.S.C. 231.
Congress in the 1930s decided that it would be a good idea to let state health authorities enter Indian reservations and to allow state truancy officers to enter Indian reservations.
Obviously considered, they took a congressional act to do this but when Congress acted, it did it in a particular way.
It authorized the Secretary of the Interior to allow these federal officers to enter.
It didn’t direct them to do it.
It authorized them at his discretion to do it.
It directed him, if he does this to write his own rules and regulations to determine the extent to which the state officers could come in and further as the truancy part of it is it specifically provided that this could only be done with the consent of the tribal government if there is a tribal government over the area in question.
Now, we submit that this is the way that States should obtain jurisdiction within Indian reservations if they are to obtain it.
It should be by congressional act and though it’s not up to me to say so particularly, I think the congressional act should also require the consent of the Indian tribe because when the reservations were created whether by treaty or Executive Order, it will certainly -- the assumption that the States would have no jurisdiction within those reservations under Worcester versus Georgia which was the ruling law then.
Justice Potter Stewart: I was just wondering whether your position rest on the fact that there are specific federal statutes from which you infer in congressional intent to exclude the States from the reservation in this case.
To exclude --
Mr. Harry R. Sachse: I don’t think it rests entirely on that.
I am not able to --
Unknown Speaker: Well then, are you saying that absent a specific federal statute granting the power to tax the Constitution or requires the state to stay out of the reservation, is that it?
Mr. Harry R. Sachse: I would agree with that except to the word “the Constitution.”
Unknown Speaker: Well that’s a big, big exempt.
Mr. Harry R. Sachse: Well, I think the Constitution combined with the treaties made with the Indians and the Enabling Acts of the states requires the States to stay out of Indian reservations without congressional approval.
But to me that’s not -- I have trouble envisaging this with the Constitution without thinking of the fact through a situation to whom would apply to namely the existence of an Indian reservation.
And the Constitution did not order the federal government to create Indian reservations but no Federal Government did.
Unknown Speaker: There were no federal statutes on the question only the Constitution.
Could the state tax, I would rather you would say no.
Mr. Harry R. Sachse: I would say that if the Indian reservation existed, it would have to exist by Executive Order or by statute or by treaty.
If it existed in any of those ways the state could not tax within that Indian reservation without the consent of the Federal Government.
Chief Justice Warren E. Burger: Mr. Winter.
Argument of James D. Winter
Mr. James D. Winter: Mr. Chief Justice and may it please the court.
The issue on this case is whether or not the State of Arizona can impose its income tax on income of a Navajo Indian earned on the Navajo Indian reservation that particular Indian residing on the reservation.
Now, there are a number of cases involving the question of federal income tax liability of Indians residing on reservations.
And those cases have been decided in favor of their tax liability.
In the Oklahoma Tax Commission case, although that was an inheritance tax case, nevertheless the Government having the decision referred to the income tax cases and state and federal income tax liability were there equated.
After -- there is the Leahy decision involving the Oklahoma income tax.
This case was decided in the 1930s.
And in many ways, it is similar to the situation that we have today although the opinion is short.
The briefs throw conservatively more light on the subject.
The all state Indians had a reservation.
They had a treaty with the Federal Government.
They had a tribal government.
As a matter of fact, the United States Congress had passed the law providing for state probate jurisdiction in regard to the Osage before this case was decided, which is an indication that they had a viable tribal government.
Now in that particular case, the court upheld the state taxation.
It appeared to the court from the opinion that since the Indians received the income and were free to dispose of it as they wished that there was no reason why they shouldn’t be taxed on it.
Justice Harry A. Blackmun: Where did they earn the income?
Mr. James D. Winter: I beg your pardon, Mr. Justice?
Justice Harry A. Blackmun: Where did the Indians earn the income in the Leahy case?
Mr. James D. Winter: In the Leahy case, the income came from restricted mineral property.
This was property that was owned by the tribe, the Osage tribe.
Justice Harry A. Blackmun: On the reservation?
Mr. James D. Winter: No.
That is something that I am not clear about because I wasn’t able to find anything in the record that indicated whether it was on or off the reservation.
There are some state court cases now.
Four of them that have raised this, rather five of them, six I am counting this case in which the question is raised and all but one of them, the Brun case from Minnesota were decided in favor of tax liability.
The Gahate case from New Mexico is the one that is probably most like ours.
It involved a Navajo Indian.
The only difference between the Gahate case and ours is that I can see is that in the Gahate case, counsel for the Navajo stipulated that imposition of the income tax by the State of New Mexico did not infringe upon the sovereignty of the Navajo tribe.
The counsel was unwilling to stipulate that in our case.
Now, in the Brun case, the court did apply the Williams versus Lee test absentee -- the test of validity of state action on Indian reservation is whether or not it infringes on any rights granted under any Act of Congress or upon the Indian right of self-government.
The court in the Brun case concluded that the imposition of the Minnesota tax infringed on the right of self-government.
There are some -- they simply assumed that it did apparently because of the economic impact of the tax.
In other words, if the Indians had to pay this tax to the State of Minnesota then there would be less able to pay a tax I supposed if the tribe should levy a tax.
At any rate, this decision certainly in this respect is in conflict with decisions in cases like Graves versus New York and Helvering versus Gerhardt which involved the questions of whether or not state employees had to pay federal income taxes and whether or not federal employees had to pay state income taxes.
In those cases, while the court concluded that the fact that an employee of a state government or a federal government had to pay income taxes to the other government did not impose any sort of substantial burden on that other government.
So, we have a test -- a practical test of substantial interference with the essential governmental function.
The court in the Brun case obviously did not apply that test.
Now, one other factors involved in this connection, this tax has been imposed by the State of Arizona since 1957 at least when Attorney General opinion on the State of Arizona was rendered on that subject and if this tax really infringed upon the self-government of the Navajo tribe.
It would seem that we should have heard about it before now.
Now, in --
Justice Thurgood Marshall: What happen --
Mr. James D. Winter: Yes, Your Honor?
Justice Thurgood Marshall: -- if tax isn’t paid?
Mr. James D. Winter: If the tax is not paid, well then the state would attempt to collect it.
Now, on a question of whether or not the state could levy on the Navajo reservation, I think that the state probably would not attempt to do that.
Because there is a --
Justice Thurgood Marshall: Do you mean that or do you say that the state could not do it?
Do you think the state could levy on that property?
That real property?
Mr. James D. Winter: On a Navajo reservation?
Justice Thurgood Marshall: Yes, sir.
Mr. James D. Winter: I don’t know, Your Honor but I am inclined to think that the state could not.
But I don’t know.
Justice Thurgood Marshall: Is a state tax the real property of it?
Mr. James D. Winter: Under our Enabling Act we cannot tax real property on the reservation.
It is specifically excluded, Your Honor from property taxation.
Justice Thurgood Marshall: What other tax do you put on?
Mr. James D. Winter: On Indians residing on the Indian reservation?
Justice Thurgood Marshall: Yes, sir.
Mr. James D. Winter: Well, the only thing that I can think of is that if it came outside of the scope of the Warren Trading Post case.
In other words, the Indians involved were not Indian traders and they were selling items on the Indian reservation.
Well, then I would think that they would be subject to the sales tax.
Justice Thurgood Marshall: Well, how many of the Indians living on the reservation that paid the sales tax?
I mean that paid the income tax?
Mr. James D. Winter: According to figures that we have, the -- it would be between $2 million and $3 million that the state has collected according to a governor’s study that was just completed in our state.
Justice Thurgood Marshall: On income tax?
Mr. James D. Winter: Yes, Your honor.
The income tax but that’s all reservations on the state and the Navajo Reservation, of course has most of the Indian population in the state because although the state may have a 125,000 Indians, 80,000 or 90,000 live on the Navajo Reservation.
Now, it’s our position that Williams Versus Lee which was cited by counsel for the appellee is distinguished both from this case because it did involved infringement up on the right of self-government of the Navajo tribe.
That case involved the jurisdiction of the courts and there the court concluded that the state courts did not have a jurisdiction over what were essentially trouble matters, matter relating to the liability of a Navajo resident of the reservation in connection with a transaction entered into on the reservation and that for the same reasons and for the additional reasons that a procedural point was involved, we think that the Kennerly case is also distinguishable.
Now, various arguments have been raised by the appellants that there was expressed congressional authorization was required in order for the state laws to apply on the reservation.
This is an extremely narrow question as I think that the United States has already conceded in regards to the Khan case.
State laws may have on Indian reservations to third persons.
Now, I think that state laws as a practical matter do apply on Indian reservations.
When you’re talking about certain benefits or even benefits that are not conferred by federal statutes or by contract under the Johnson-O’Malley Act and I am talking about such things as the right to vote.
When a Navajo Indian votes on a Navajo Reservation in a state election, he does not vote under tribal law or a federal law.
He is voting under state law.
Now, the case of Kake versus Egan set down what we considered the rule to be that state laws do apply on Indian reservations with two exceptions.
If they do not infringe upon the tribal government of the tribe or if they do not infringe upon any rights which were granted by an act of Congress.
This is certainly in line with what this Court has held before in Surplus Trading Company versus Cook.
I believe, it was indicated to the effect that state laws have restricted application on Indian reservations.
Meaning that they do have application and I think by restricted application what the court was referring to were the exceptions such as the Indian right of self-government.
And these laws cannot apply if they are in conflict with federal laws.
And then in New York versus Martin where the court said that in the absence of treaty obligations are federal statute’s state laws do apply Indian reservations.
Now, it is our position that no Act of congress prohibits application of state income taxes to Indians.
The first statute that comes to mind in this connection in chronological order is the State Enabling Act of the State of Arizona.
And because there has been considerable confusion about the language, I would just like to read the language that has been the subject of dispute in this connection, “That the people inhabiting the said proposed state do agree and declare that they forever disclaim all right entitled to the unappropriated and ungranted public lands lying within the boundaries thereof and all lands lying within said boundaries owned or held by any Indian or Indian tribes.
The right or title to which it shall have been acquired through or from the United States or any prior sovereignty and that until the title of such Indian or Indian tribes shall have been extinguished the same shall be and remain subject to the disposition and under the absolute jurisdiction and control of the Congress of the United States.”
These are what we referred to as disclaimer in the absolute jurisdiction and control provisions.
Now, they do not refer to Indian reservations although subsequently in the Enabling Act the Congress did refer to Indian reservations.
But they refer to Indian lands and the reason for that distinction as was pointed out in the Draper case was because in the General Allotment Act of 1887, Congress provided that Indians living off of reservations could obtain some unappropriated public lands that would be subject to the same restrictions as lands that were obtained under allotments.
It was a desire of Congress at the time that Arizona was admitted to the union to protect the rights of the Indians in these lands.
And this Enabling Act is like that of many other states.
And this was done, this language was used, Indian lands were referred to for that reason.
There was no ambiguity at all in doing it and I think that this is confirmed by a number of state court decisions on the subject, as well as the more recent decision of this Court in Kake versus Egan.
Now, there has -- Public Law 280 was enacted in 1953.
At that time, the policy of the Federal Government was to get out of the Indian reservations or it was the Termination Policy and this was one of -- and because this was the concern at that time, the provisions of 280 provided for state assumption of jurisdiction.
Now, there was also some confusion at that time about what the State Enabling Acts meant.
This confusion has indicated in a letter that we have quoted from that was in the committee reports.
It’s in our brief and so Congress acted partly to clear up this confusion.
They wanted to provide a procedure so that the States would not consider these Enabling Acts to be a stumbling block.
So that they would assume for measure of jurisdiction so that the Federal Government could be relieved of all responsibility for as soon as the Indians were ready for this.
Public Law 280 did not deprive the States of any jurisdiction that they already have.
Now, the Civil Rights Act of 1968 amended Public Law 280 in effect to require tribal consent to the state assumption of jurisdiction.
There is one more item and that is the Treaty of 1868.
And that treaty has nothing at all in and about the tax liability of the Indians.
It was in 1871 that the Government decided that the Indians were an internal problem that there would be no more treaties with the Indians and it would not seem fair to distinguish between the Navajos and the other Indians because the Navajos have a treaty that says nothing about taxes.
Immunity from taxation is not to be implied.
If Congress has intended to accept a 100,000 Navajos in Arizona from income taxes, they would certainly have said so in clear and unmistakable language.
Now, the Navajos are unusual in Indian reservation.
There are about 16 or 18 Indian reservations in the State of Arizona and the Navajos are not represented.
They are an extremely large reservation.
They have more resources than the average reservation does and so they certainly require a less assistance than the other reservations do because some of the reservations are so small that they are hardly an economical unit, some an economical governmental unit.
Some of them may only have a few hundred acres and few hundred Indians on them and they can’t provide, they can’t receive the services from the Federal Government that the state would provide for them and they are obviously not able to furnish those services themselves.
But even the Navajo Indians require many services from the state and it’s -- I don’t regard as important but counsel for the other side mentioned it and I am reluctant to mention it because it’s outside the record.
But nevertheless, according to the information from our Governor’s Report the financial picture that he presented of the relationship of the Indian and the tribe is not at all accurate.
The state does have a very substantial state in the sense that the state spends a lot more money on the Indian reservations and it gets back out of them and the total runs into millions of dollars.
Now, the income tax on net income is a very fair tax.
The rate structure of the Arizona state income tax is a low one.
It runs from 1.5% to 8%.
It is an extremely fair way to balance the burdens of state government.
Chief Justice Warren E. Burger: Counsel, all of those are very good arguments on the economic theory of why they should be taxed but you don’t reach the statutory basis or any constitutional basis, do they?
Mr. James D. Winter: That is true, Your Honor.
Chief Justice Warren E. Burger: That might be --
Mr. James D. Winter: I was only mentioning them because it had been mentioned before and ever since the Warren Trading Post Case, we felt that the state does make provision for the Indians on the reservation and of course the state’s rule is greatly grown but I agree.
I have no further arguments, Your Honor, unless the Court has any questions.
Chief Justice Warren E. Burger: Very well and thank you very much.
I think your time is up but if you have something important --
Rebuttal of Robert B. Collins
Mr. Robert B. Collins: Excuse me your honor, I though I had a minute.
Chief Justice Warren E. Burger: Well, your friend used it up but we’ll give it back to you anyway if you have something on your mind.
Mr. Robert B. Collins: I have only about two or three sentences, Your Honor.
May it please the Court.
In reply to Mr. Justice White’s question about the Constitution, we definitely do think it’s a constitutional allocation of power and that the establishment of the reservation is all the Federal Government formal involvement necessary, I think Mr. Sachse said that.
The Leahy case and other Oklahoma cases are in Oklahoma where there is a law like Public Law 280 and has been and was at that time in the Leahy case committing jurisdiction to the States.
It wasn’t the same as Public Law 280.
It may not have the same scope but it certainly doesn’t apply to the Navajos.
And finally --
Justice Byron R. White: The tax there was on the individual share of tribal income?
Mr. Robert B. Collins: It was on a mineral share from an allotment I believe, Your Honor.
Justice Byron R. White: [Voice Overlap] does the individual share of income on property owned by the tribe?
Mr. Robert B. Collins: Well, Your Honor, it’s on what’s called the Osage Mineral shares which had been ruled be personal property of the individual Indian.
I agree that they are formally shares in the tribe’s mineral income but the shares are inheritable by one Indian from another.
Justice Byron R. White: Exactly.
Mr. Robert B. Collins: And finally, one more sentence, excuse me.
Unknown Speaker: Am I not right in remembering that in the Lee case?
Somewhere in the course in that opinion, I think in the footnote.
The distinctively different Oklahoma situation was mentioned.
Mr. Robert B. Collins: Yes, Your Honor that’s correct.
Unknown Speaker: And it is a distinctively different situation at least to find specific statute a predecessor was not of the more generalized 280.
Mr. Robert B. Collins: That -- that’s our point, Your Honor, that the Oklahoma situation has no application here because it’s subject to special laws that don’t apply to Arizona and --
Justice Thurgood Marshall: I would assume that the Former Chief Justice of the Court of Criminal Appeals in Oklahoma paid income tax because he was Choctaw Indian but he was also the Chief Judge.
So I assume, he paid state income tax and I don’t see what’s your ending do with this case at all?
Mr. Robert B. Collins: I agree with that Your Honor.
I had one more sentence which is that, this Court and -- we contended as an order and granted decision, this Court has construed Public Law 280 to be ruling in this case and the Kennerly case.
I don’t have time to go into that but it’s in the briefs.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.