Taxation and the Prisoner's Dilemma

The May 2006 cover story in the ABA Journal features Mike Taylor, tribal attorney for the Tulalip Tribes north of Seattle. Mike is the architect of Quil Ceda Village, the big tribal mall on I-5. The mall brings in excellent revenues to the Tribes, but the tribal retailers (including Wal-Mart and Home Depot), must collect taxes on sales to nonmembers and remit the money to the State of Washingon. The article reads:

For the state, it's a sweet deal. It doesn't have to make any concessions or put up any money to get a large new tax base. At Quil Ceda, for example, all the utility work for roads, sewers, water lines, electricity, etc., was paid for by the tribes. The Tulalips even contributed money for work on a new interchange from the interstate, which also benefits nearby communities. The tribes also hire, train and pay for their own police force.

But the state gets all the sales tax money. Thought some of the money eventually makes its way back to the local economy in the form of county and local grants and revenue sharing, the tribes get none of the tax money in return for their infrastructure investment and ongoing administrative expenses.

"The state right now is engaged in theft," Taylor says.

Best quote of the week. Like any competitor for a limited pie, the State of Washington played the prisoner's dilemma game with the Tulalip tribes -- and won because they contributed nothing. John Nash predicted that repeated plays of the game would lead to a more optimum result -- the Nash equilibrium -- but the Tulalips got to play only once.

Others, like Del Laverdure, talk about how local governments benefit from tribal economic development -- all without having to contribute much back to the tribe. At a talk at the Turtle Mountain Community College, Del alleged that a large portion Big Horn County's annual budget is derived from property taxes collected on fee land owned by Crow Tribe members. He called it "taxation without representation," but it's just the prisoner's dilemma.