INDIAN GAMING….Jacob Levy today:

During the California recall, candidate Schwarzenegger and his team repeatedly attacked Indian groups for lavishing casino-generated campaign contributions on Lieutenant Governor Cruz Bustamente. Then, after the election, Governor-elect Schwarzenegger made taxing Indian casinos one of the centerpieces of his deficit-reduction plan, apparently oblivious to the conflict between this and his pledge not to raise taxes, and to the legal and constitutional issues involved.

Ha ha ha. Did I say no new taxes? I meant no new taxes unless you’re an Indian.

Which reminds me: as I was waiting in line yesterday to get my driver license renewed, I listened in on a typically abysmal political conversation that happened to be about Indian gaming. My fellow line-waiters were appalled that Gray Davis “allowed” the tribes to get away without paying taxes and were delighted that Arnold was in town to kick some ass.

These guys were clueless. In case you’re interested in actual facts, here’s the real story:

  • The states have no power to tax Indian tribes. Period.

  • However, although federal law guarantees tribes the right to run casinos, states are allowed to limit their operation in certain ways. Pete Wilson took a hard line on limiting Indian gaming in California, but the main result of his hardball tactics was the passage of Proposition 5 in 1998, which gave the tribes expansive rights with no obligation to pay state taxes. Thanks, Pete!

  • Prop 5 provided Gray Davis ? also elected in 1998 ? with virtually no leverage in negotiating with the tribes. So the deal he eventually brokered was probably about as good as possible under the circumstances.

  • Prop 5 was eventually overturned by the courts and replaced by Prop 1A a couple of years later. However, the bottom line remained the same: the passage of Prop 1A combined with the tribes’ demonstrated ability to get propositions passed gave Davis a very weak hand in dealing with the tribes. There really wasn’t that much he could do to squeeze higher taxes out of them.

So did Gray Davis give the tribes a “free ride”? Who knows. But the fact is that he didn’t “allow” anything: the state has no direct authority to tax the tribes and can only squeeze money out of them through a negotiating process in which it has a pretty weak hand to play.

Can the Terminator do better? Maybe, but I wouldn’t bet the lunch money on it yet. There’s an awful lot of reality waiting for Arnold up in Sacramento.

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