THE OTHER TAXATION: TRIBES, TERRITORIES, AND FISCAL AUTONOMY

Native Americans pay taxes. Territories, by contrast, tax in place of the federal government. Both live with the legacy of American imperialism. Both seek the elusive fiscal self-governance and autonomy promised by Congress. The Supreme Court—through preemption, the plenary power doctrine, and interpretive principles—has hollowed out the Native tax base, forcing tribes to compete fiercely with Congress, states, and localities for revenue. By contrast, territorial residents pay no federal or state taxes on territorially sourced income by edicts of Congress and geography. But such tax exemption enabled the creation of incentive regimes that have only invited more criticism as entrenching subordination. This Article argues that the conceptual underpinnings of the divergent tax treatment of tribes and territories are unsound. Under a more robust vision of fiscal autonomy, judicial limits on Native tax sovereignty are misguided. The territories’ wide latitude in designing revenue streams merits increased scrutiny. While imperfect, a uniform, nonrefundable federal income-tax credit for tribal and territorial taxes paid is a promising path forward. This Article thus provides the first systematic study of subfederal taxation beyond states and localities—the “other” American taxation often overlooked in scholarship.

The full text of this Article can be found by clicking the PDF link to the left.

* Associate Professor of Law, Emory University. First thanks go to Willy Fletcher, whose commitment to justice in all areas—and in particular in Federal Indian Law and Federal Courts—first inspired this Article. I thank David R. Agrawal, Guido Calabresi, Luís Calderón Gómez, James Campbell, Conor Clarke, Andy DeGuglielmo, Jon Endean, Victor Fleischer, David Gamage, Ari Glogower, Gaga Gondwe, Vasiliki Koukoulioti, Ronald Krotoszynski, Ira Lindsay, Michael Love, Christian McMillen, Ajay Mehrotra, Edgar Melgar, Beverly Moran, Shu-Yi Oei, Nate Oman, Henry Ordower, Amanda Parsons, Farah Peterson, Philip Postlewaite, Elizabeth Hidalgo Reese, James Repetti, Judith Resnik, Diane Ring, Erick Sam, Ani Satz, Daniel Schaffa, David Schizer, Brian Slocum, Christine Speidel, Lauren van Schilfgaarde, Alvin Velazquez, Maximilien Zahnd, Lawrence Zelenak, and audiences at the Boston College Law School, Columbia Law School, Duke Law School, Northwestern University Pritzker School of Law, U.C. Irvine School of Law, University of Missouri School of Law, the 2024 Junior Tax Workshop, the 2024 annual meeting of the United Kingdom Society of Legal Scholars at the University of Bristol, the 2025 Southeast Junior-Senior Conference at Wake Forest Law School, and the Symposium on Imperial Administration at the 2025 annual meeting of the American Society for Legal History for their insights and feedback, as well as the editors of the Columbia Law Review, especially Nicolas Tabio, for their diligence and editorial precision. The content presented in this Article reflects only my own views.

Introduction

Fiscal autonomy forms the foundation of self-governance. The power to tax enables robust provision of public goods. 1 See, e.g., Owen M. Fiss, Why the State?, 100 Harv. L. Rev. 781, 789 (1987) (“Examples of this form of state intervention include aid to public libraries, public schools, private and state universities, public broadcasting, and presidential candidates.”); Liam Murphy & Thomas Nagel, Taxes, Redistribution, and Public Provision, 30 Phil. & Pub. Affs. 53, 54 (2001) (explaining how taxation “plays a central role in determining how the social product is shared out among different individuals, both in the form of private property and in the form of publicly provided benefits”). Allocation of tax burdens effects the regime’s vision of distributive justice and is the primary tool of income redistribution in the United States. 2 See Kirk J. Stark, Fiscal Federalism and Tax Progressivity: Should the Federal Income Tax Encourage State and Local Redistribution?, 51 UCLA L. Rev. 1389, 1390 (2004) (“[F]ederal law (especially federal tax law) has served as the primary vehicle through which income and wealth were redistributed in the United States.”); see also Joseph Bankman & Thomas Griffith, Social Welfare and the Rate Structure: A New Look at Progressive Taxation, 75 Calif. L. Rev. 1905, 1910–18 (1987) (describing that “a theory of distributive justice” is needed “[t]o determine the desirability of a tax structure”); Ariel Jurow Kleiman,Impoverishment by Taxation, 170 U. Pa. L. Rev. 1451, 1453 (2022) (“The tax and transfer system improves on market outcomes by redistributing resources from rich to poor.”). A key motivation of the 1787 Constitution was Congress’s taxing power. 3 See The Federalist No. 30, at 188 (Alexander Hamilton) (Clinton Rossiter ed., 1961) (arguing for “a general power of taxation” to “be interwoven in the frame of the government”). The Articles of Confederation set up a federal government with no independent means of raising revenue, relying instead on the states’ generosity to implement federal policy. 4 See Articles of Confederation of 1781, art. IX (relying on revenue by requisition from the states); Pekka Pohjankoski, Federal Coercion and National Constitutional Identity in the United States 1776–1861, 56 Am. J. Legal Hist. 326, 328–33 (2016) (noting that even though “requisitions were ‘binding’ according to the Articles, in reality there was widespread noncompliance by the states” (quoting Articles of Confederation of 1781, art. IX)); see also Saikrishna Bangalore Prakash, Field Office Federalism, 79 Va. L. Rev. 1957, 1964–65 (1993) (describing how the Articles of Confederation “enfeebled” Congress by denying it “a robust, reliable stream of funds”). A generation of social mobilization fought for the possibility of a progressive income tax. 5 See generally Ajay K. Mehrotra, Making the Modern American Fiscal State: Law, Politics, and the Rise of Progressive Taxation, 1877–1929 (2013) [hereinafter Mehrotra, Making the Modern American Fiscal State] (examining the transformation of American public finance from a system of indirect, regressive taxation to a direct, progressive income tax). Even today, lawmakers and scholars clash with the Supreme Court over Congress’s power to tax the ultrarich on their unrealized gains and wealth—a power critical to federal fiscal autonomy in an age of tax cuts, increased spending, and astonishing budget shortfalls. 6 See Moore v. United States, 144 S. Ct. 1680, 1685 (2024) (considering whether Congress has the power to enact the mandatory repatriation tax under Article I and the Sixteenth Amendment); Brief of Amici Curiae Professors Bruce Ackerman, Joseph Fishkin & William E. Forbath, in Support of Respondent at 1, Moore, 144 S. Ct. 1680 (No. 22-800) (“Amici’s interest . . . is in exploring the original understanding of the Sixteenth Amendment . . . and why it should continue to define the scope of Congress’s power of taxation as the nation confronts the challenges of the twenty-first century.”); Brief of Amici Curiae Reuven Avi-Yonah, Clinton G. Wallace & Bret Wells, in Support of Respondent at 2, Moore, 144 S. Ct. 1680 (No. 22-800) (arguing that Nonrealization Rules “are essential to the broader scheme of income taxation envisioned by the Sixteenth Amendment—to ensure comprehensive and consistent taxation of all income across varied sources . . . .”); John R. Brooks & David Gamage, The Original Meaning of the Sixteenth Amendment, 102 Wash. U. L. Rev. 1, 5–6 (2024) (arguing that the Sixteenth Amendment was designed to overrule Pollock v. Farmers’ Loan & Trust Co. and to restore Congress’s broad power over income taxation); Alex Zhang, Rethinking Eisner v. Macomber, and the Future of Structural Tax Reform, 92 Geo. Wash. L. Rev. 179, 181–83 (2024) (examining the legal movement to constitutionalize the realization requirement and to shift federal power over distributive policy from Congress to the Supreme Court); see also Ari Glogower, A Constitutional Wealth Tax, 118 Mich. L. Rev. 717, 721–22 (2020) (describing income-tax workarounds to implement a federal wealth tax); Dawn Johnsen & Walter Dellinger, The Constitutionality of a National Wealth Tax, 93 Ind. L.J. 111, 113–14 (2018) (challenging the view that enactment of a federal wealth tax requires constitutional amendment). For tax cuts and deficits, see Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017); Michael J. Graetz, Foreword—The 2017 Tax Cuts: How Polarized Politics Produced Precarious Policy, 128 Yale L.J. Forum 315, 316 (2018), https://www.yalelawjournal.org/pdf/ Graetz_z4nc57qx.pdf [https://‌perma.cc/25UV-VBMP] (noting that the 2017 tax act “created significant new differences in income tax” and “massive and unsustainable increases in deficits and the national debt”). For a description of the modern anti-tax movement, see generally Michael J. Graetz, The Power to Destroy: How the Antitax Movement Hijacked America (2024).

Scholars have intensely debated the reach of the federal taxing power. 7 See supra note 6 (collecting scholarly arguments); see also Bruce Ackerman, Taxation and the Constitution, 99 Colum. L. Rev. 1, 4–6 (1999) (arguing for broad congressional discretion in tax policy); John R. Brooks & David Gamage, Taxation and the Constitution, Reconsidered, 76 Tax L. Rev. 75, 82 (2022) (discussing past judicial deference to tax legislation through the “Excise Tax Canon”); Daniel Hemel, Taxing Wealth in an Uncertain World, 72 Nat’l Tax J. 755, 756–57 (2019) (discussing the “constitutional uncertainty” of structural tax reform); Erik M. Jensen, Did the Sixteenth Amendment Ever Matter? Does It Matter Today?, 108 Nw. U. L. Rev. 799, 802 (2014) (arguing for constitutional constraints on innovation in federal tax structure); Alex Zhang, The Forgotten Income-Attribution Power, 135 Yale L.J. 923, 995–1007 (2026) (assessing the federal power to tax corporate income to shareholders after Moore v. United States). Constraints on national taxing powers also arise from international tax competition and the rise of tax havens. See Reuven S. Avi-Yonah, Globalization, Tax Competition, and the Fiscal Crisis of the Welfare State, 113 Harv. L. Rev. 1573, 1576–78 (2000) [hereinafter Avi-Yonah, Globalization, Tax Competition] (explaining that globalization “limits governments’ ability to collect . . . revenues”). They have also assessed state and local autonomy, often in the shadow of the Commerce Clause and the fiscal hegemony of Congress. 8 See, e.g., Peter D. Enrich, Saving the States From Themselves: Commerce Clause Constraints on State Tax Incentives for Business, 110 Harv. L. Rev. 377, 405 (1996) (“The states find themselves caught, by competitive pressures compounded by political imperatives, in a contest that none of them can win.”); Brian Galle, Kill Quill, Keep the Dormant Commerce Clause: History’s Lessons on Congressional Control of State Taxation, 70 Stan. L. Rev. Online 158, 159 (2018), https://review.law.stanford.edu/wp-content/uploads/‌‌‌‌sites/3/2018/03/70-Stan.-L.-Rev.-Online-158-Galle.pdf [https://perma.cc/RWW4-J64L] (“Quill established a kind of penalty default, denying states an important aspect of fiscal autonomy in the hopes that they would then use their political sway with Congress to craft a more pragmatic solution.”); David Gamage & Darien Shanske, Tax Cannibalization and Fiscal Federalism in the United States, 111 Nw. U. L. Rev. 295, 297–98 (2017) [hereinafter Gamage & Shanske, Tax Cannibalization] (explaining that state-level taxes on corporate income, capital gains, and possibly ordinary income impose large, wasteful costs through “tax cannibalization”); Ariel Jurow Kleiman, Tax Limits and the Future of Local Democracy, 133 Harv. L. Rev. 1884, 1885 (2020) [hereinafter Kleinman, Tax Limits] (“[T]ax limits may reflect genuine concerns about government profligacy and nonresponsiveness.”); Michelle D. Layser, Removing Barriers to State Tax Incentive Reform, 171 U. Pa. L. Rev. 1235, 1237–38 (2023) (“[S]tate-level place-based tax incentive reforms face significant constitutional barriers that are absent at the federal level.”); Darien Shanske, Local Fiscal Autonomy Requires Constraints: The Case for Fiscal Menus, 25 Stan. L. & Pol’y Rev. 9, 12 (2014) (asserting that new state-level rules can be implemented to “enhance the operations of local democracy”); Daniel Shaviro, An Economic and Political Look at Federalism in Taxation, 90 Mich. L. Rev. 895, 897 (1992) (urging Congress to use its Commerce Clause powers to restrain states’ taxing authority to the determination of their tax rates as opposed to the determination of the applicable tax bases); see also Richard Briffault, Our Localism: Part II—Localism and Legal Theory, 90 Colum. L. Rev. 346, 453 (1990) (problematizing local autonomy); Daniel J. Hemel, Federalism as a Safeguard of Progressive Taxation, 93 N.Y.U. L. Rev. 1, 5 (2018) (contending that the Supreme Court’s federalism doctrine has shifted fiscal and revenue-generation pressure to the much more progressive federal income tax system). But within the United States, two other subnational governments have distinctive powers to tax. First, Native tribes can tax as an inherent attribute of sovereignty. 9 Washington v. Confederated Tribes of the Colville Indian Rsrv., 447 U.S. 134, 152 (1980) (“The power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty . . . . The widely held understanding within the Federal Government has . . . been that federal law to date has not worked a divestiture of Indian taxing power.”). This authority extends at least as far as nonmembers’ economic activities on trust lands. 10 See Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 159 (1982) (holding that the tribe had not surrendered its tribal taxing power); see also The Kansas Indians, 72 U.S. (5 Wall.) 737, 757 (1866) (holding that the state did not have the power to tax trust lands). As the Supreme Court has explained, tribal taxing power fosters “self-government” by “defray[ing] the cost of providing governmental services.” 11 Merrion, 455 U.S. at 137; see also Exec. Order No. 14,112, 88 Fed. Reg. 86022 (Dec. 11, 2023) (calling for “administ[ration of federal] funding in a manner that provides Tribal Nations with the greatest possible autonomy to address the specific needs of their people”). Despite the rhetoric of autonomy, federal courts have shrunk this power and simultaneously expanded the states’ power to tax on Native land. 12 See Atkinson Trading Co. v. Shirley, 532 U.S. 645, 659 (2001) (“The Navajo Nation’s imposition of a tax upon nonmembers on non-Indian fee land within the reservation is . . . presumptively invalid.”); Okla. Tax Comm’n v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505, 512–13 (1991) (“Although the doctrine of tribal sovereign immunity applies to the Potawatomis, that doctrine does not excuse a tribe from all obligations to assist in the collection of validly imposed state sales taxes.”); infra sections I.B–.C. As a result, commentators and Native communities have decried tax policy as modern instruments of wealth extraction that limit essential services on reservations. 13 See, e.g., Nat’l Cong. of Am. Indians, Res. No. SD-15-036, Support for Tribal Tax Reform and Setting Tax Policy Priorities (2015), https://home.treasury.gov/system/
‌‌‌files/226/For%20the%20Record %209182019%20NCAI%20Tax %20Priorities%20Resolution %20SD-15-036.pdf
[https://perma.cc/7QKL-THPH]; Maya Srikrishnan, Shannon Shaw Duty & Joaqlin Estus, Tribes Need Tax Revenue. States Keep Taking It., Ctr. Pub. Integrity (Dec. 20, 2022), https://publicintegrity.org/podcasts /integrity-out-loud/tribes-need-tax-revenue-states-keep-taking-it [https://perma.cc/5C9F-AVRH]. Their demand is simple but powerful: “You Can’t Tax Stolen Lands,” and Congress should put tribes on an equal fiscal footing as states. 14 Misha Hill, You Can’t Tax Stolen Land, Inst. Tax’n & Econ. Pol’y (Apr. 12, 2019), https://itep.org/you-cant-tax-stolen-land [https://perma.cc/TY35-MN3H]; see also Hearing on Examining the Impact of the Tax Code on Native American Tribes Before the Subcomm. on Selected Revenue Measures of the H. Comm. on Ways & Means, 116th Cong. 3 (2020), https://democrats-waysandmeans.house.gov/sites /evo-subsites/democrats-waysandmeans.‌house.gov/files /documents/Rodney%20Butler %20Testimony.pdf [https://perma.cc/Q376-XY5D] (statement of Rodney Butler, Chairman, Mashantucket Pequot Tribal Nation); Matthew L.M. Fletcher, In Pursuit of Tribal Economic Development as a Substitute for Reservation Tax Revenue, 80 N.D. L. Rev. 759, 767 (2004) [hereinafter Fletcher, In Pursuit of Tribal Economic Development] (outlining how the practical response to issues in tribal taxation is to treat tribes as governments).

Second, U.S. territories—American Samoa, Guam, Northern Mariana Islands (CNMI), Puerto Rico, and the Virgin Islands—can tax pursuant to authorization by Congress. 15 See Alex Zhang, The Origins of U.S. Territorial Taxation and the Insular Cases, 134 Yale L.J. Forum 556, 585–86 (2025), https://www.yalelawjournal.org/pdf/ ZhangYLJForumEssay _id98771d.pdf [https://perma.cc/U58S-HNGU] [hereinafter Zhang, The Origins of U.S. Territorial Taxation] (“The evolution of interterritorial variation in income-tax powers again reflects Congress’s focus on safeguarding federal tax receipts.”). As in the context of federal Indian law, territorial taxing power has been grounded in fiscal autonomy and self-government. 16 The rhetoric of autonomy has permeated congressional discussions of territorial tax design since the turn of the twentieth century. See id. at 560. Unlike tribes, however, territories face little tax competition. They have no overlapping jurisdiction with states and fall outside of the Internal Revenue Code’s (the “Code”) definition of the “United States.” 17 I.R.C. § 7701(a)(9) (2018) (defining the “United States” to include “only the States and the District of Columbia”). Bona fide residents of the territories—including U.S. citizens—are therefore exempt from federal taxation of territorially sourced income. 18 See id. §§ 931, 933; 48 U.S.C. § 734 (2018); United States v. Vaello Madero, 142 S. Ct. 1539, 1543 (2022) (describing Puerto Rico residents’ exemption from most forms of federal income, gift, and estate taxation). This general tax exemption is subject to several exceptions (e.g., income sourced to mainland United States or to foreign—that is, nonmainland and nonterritorial—jurisdictions like the United Kingdom, as well as income of federal government employees). See I.R.C. §§ 861(a), 931(d), 933(1), 937(b)(1); infra note 287 and accompanying text. Instead, they pay a local tax on such income to fulfill their fiscal obligations to both the territorial and the federal government. 19 See, e.g., I.R.C. § 933(1) (exempting from taxation, “[i]n the case of an individual who is a bona fide resident of Puerto Rico during the entire taxable year, income derived from sources within Puerto Rico (except amounts received for services performed as an employee of the United States or any agency thereof)”); Vaello Madero, 142 S. Ct. at 1542. Congress has even empowered Puerto Rico and American Samoa to deviate from federal-income-tax rules: As a matter of formal statutory authorization, they can craft their own tax regimes to incentivize investment and effect territorial policy. 20 See Tax Reform Act of 1986, Pub. L. No. 99-514, § 1271, 100 Stat. 2085, 2591–93; P.R. Laws Ann. tit. 13, § 30061 (LexisNexis, LEXIS through 2025 Legis. Sess.) (taxing income at 7%–33%, rates which are lower than federal income tax rates). The Tax Reform Act of 1986 conditioned the power of Guam, American Samoa, and the Northern Mariana Islands to deviate from the federal income tax on an implementation agreement. See Tax Reform Act of 1986, § 1277(b). Such an agreement is in effect only for American Samoa, which has, in any event, adopted a system mirroring federal income taxation. See Am. Sam. Code Ann. §§ 11.0401, 11.0403 (2021); Tax Implementation Agreement Between the United States of America and American Samoa, Dec. 10, 1987–Jan. 7, 1988, IRS, https://www.irs.gov/pub/irs-lbi/tax_implementation_agreement _between_the_us_and_american _samoa.pdf [https://perma.cc/DCL2-JTH8]. Of course, many practical considerations (such as poverty and Congress’s distaste for direct investment) prevent the territories from enacting cohesive and completely self-sustaining tax regimes. See infra Part II. By contrast, Guam, CNMI, and the Virgin Islands are “mirror-Code” jurisdictions and must use the federal income tax as the local, territorial tax regime. 21 48 U.S.C. §§ 1397, 1421i(a); Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America, Pub. L. No. 94-241, Art. VI, § 601(a), 90 Stat. 263, 269 (1976) (codified as amended in the notes of 48 U.S.C. § 1801); Organic Act of Guam, Pub. L. No. 81-630, § 31, 64 Stat. 384, 392 (1950). Puerto Rico has exercised this power and enacted a host of tax incentives to attract the wealthy to relocate from the mainland. 22 See, e.g., P.R. Laws Ann. tit. 13, §§ 10831-10844 (LexisNexis, LEXIS through 2025 Legis. Sess.) (codifying Act 20 to Promote the Export of Services); id. §§ 10851-10855 (codifying Act 22 to Promote the Relocation of Individual Investors to Puerto Rico). This has increased economic inequality and led to an influx of cryptocurrency tycoons and hedge fund managers. 23 See Mariah Espada, Influencers, Developers, Crypto Currency Tycoons: How Puerto Ricans Are Fighting Back Against the Outsiders Using the Island as a Tax Haven, Time (Apr. 19, 2021), https://time.com/5955629/puerto-rico-tax-haven-opposition (on file with the Columbia Law Review) (discussing the tax exemptions available for wealthy individuals who move to Puerto Rico but are unavailable to Puerto Rican residents). Locals have criticized these tax regimes as fueling a predatory “tsunami of gentrification.” 24 Id. (internal quotation marks omitted) (quoting Myrna Veda Pagan Gómez).

Both Native and territorial taxing powers are thus grounded in fiscal autonomy. But this concept cannot rest on taxing power alone. For Native tribes, diminished power to tax has impoverished their members. 25 See, e.g., Nat’l Cong. of Am. Indians, Res. No. MOH-17-011, Equitable Treatment for Tribal Nations in Congressional Tax Reform, at 1 (2017), https://ncai.assetbank-server.com/assetbank-ncai/action/viewAsset?id=627&index=0&total=1&view=view
SearchItem (on file with the Columbia Law Review) (noting that the differential treatment of state and tribal governments in taxing power “significantly handicaps tribal authority to provide much needed government revenue for tribal programs and prevents economic growth on tribal lands”); infra sections I.B–C. On the other hand, the robust taxing powers of territorial governments—even to replace the federal income tax—have brought neither prosperity nor self-governance. 26 See infra notes 363–373 and accompanying text (criticizing Puerto Rico’s tax-incentive regimes). This point is salient as Native communities have gestured toward the territories as examples of fiscal autonomy. See Nat’l Cong. of Am. Indians, Res. No. SD-15-036, supra note 13, at 3 (calling for tribal “autonomy from the Internal Revenue Service like the Commonwealth of Puerto Rico”). Missing from the scholarship is an account of what exactly fiscal autonomy entails in subfederal taxation. 27 See infra section III.A (surveying scholarship). This involves a robust understanding of how federal tax law treats Native tribes and the territories and how fiscal self-governance works for communities living with the legacy of American imperialism.

This Article fills the gap. It analyzes the federal tax regime as applied to tribal and territorial communities, showing their diametrically opposite treatment under federal law. 28 See infra Part I. This analysis unsettles the traditional rhetoric of “preferential” treatment for Native Americans. See Carole Goldberg, American Indians and “Preferential” Treatment, 49 UCLA L. Rev. 943, 944–45 (2001) (describing equality-based challenges to the “[s]eparate rights, preferences, governmental recognition, and benefits for Indian nations” in American law). Based on this analysis, it argues that fiscal autonomy is a twofold concept. 29 This fiscal, institutional concept of autonomy contrasts with the liberal tradition of individual autonomy. See infra notes 433–436 and accompanying text; see also Angela R. Riley, (Tribal) Sovereignty and Illiberalism, 95 Calif. L. Rev. 799, 802 (2007) (contrasting tribal sovereignty and federal Indian law principles with the standard demands of Western liberalism). First-order structural autonomy concerns taxing power as to the substance and receipt of funds. 30 See infra section III.B.1. Subnational governments can tax to the exclusion of others with no formal tax competition or share funds acquired from the same tax base with other jurisdictions. This question goes to how much revenue is available to them within the confines of their tax base. Further, subnational governments can have substantial authority to design their own tax regimes or must tax in ways derivative of or shaped by the distributive preferences of the national community. This question goes to how they may raise revenue, which implicates key questions of fairness.

By contrast, second-order governance autonomy concerns democratic decisionmaking. 31 Second-order fiscal autonomy tracks, but does not perfectly replicate, contemporary philosophical discussions of autonomy. See infra notes 423–432, 481–485 and accompanying text (surveying contemporary discussions of individual autonomy, including the use of hierarchical theories and second-order value formation to define autonomy in contrast to unconstrained freedom). See generally Harry G. Frankfurt, Freedom of the Will and the Concept of a Person, 68 J. Phil. 5 (1971) (contrasting first-order desires with second-order volitions in the context of individual autonomy). Given the degree of structural, first-order autonomy enjoyed by subnational governments, to what extent can they tax in accordance with their citizens’ sense of distributive equity? Constraints on democratic and responsive fiscal governance can be internal to the subnational community—for example, because the wealthy dominate internal distributive politics. 32 See infra notes 487–500, 517–533 and accompanying text. They can also be external to the subnational community—for example, because its members lack representation in the national government. 33 See infra notes 501–516 and accompanying text. Further, these constraints can be formal, like institutional or process defects that fail to channel preferences into lawmaking, or functional, like outsized influence of wealth on preference formation itself.

The interaction between first- and second-order autonomy is dynamic: The degree to which subnational governments deserve the formerrests on its capacity for the latter. That is, robust taxing powers demand adherence to the citizens’ vision of distributive justice in fashioning tax policy. 34 See infra section III.B.2. Any claims to autonomy thus entail an assessment of not only tribal and territorial authorities to tax but also their potential for fiscal self-governance—both of which have inevitably been influenced by extractive and paternalist federal policies, past and present. 35 See infra Figure 1 (illustrating the fiscal capacity and tax-design powers of tribes and territories); infra Table 2 (summarizing the infrastructure of tribes and territories for democratic and responsive fiscal governance). Thus framed, the concept of fiscal autonomy captures the element of sovereignty that relates to self-governance in taxation but is not co-extensive with the traditional or doctrinal concept of sovereignty. 36 In subfederal governance, this point is especially salient as to territorial and local governments, which do not enjoy, as a matter of doctrinal analysis, sovereignty independent from Congress or the states which created them. See Puerto Rico v. Sanchez Valle, 579 U.S. 59, 69–70, 75 (2016) (distinguishing the sovereignty of tribal and state governments from the authority of territorial governments). Overall, this Article’s normative framework suggests that judicial limits on tribal taxing power are misguided. By contrast, the territories’ wide latitude in designing revenue streams merits further scrutiny.

This analysis is functionalist: It focuses on tribal and territorial governments’ capacity in designing tax policy that is responsive to the will of the people they govern. Formal mechanisms of democracy (e.g., written constitutionalism, procedural safeguards in legislation, or numeric representation 37 See Matthew L.M. Fletcher, American Indian Tribal Law 138 (3d ed. 2024) [hereinafter Fletcher, Tribal Law] (“Tribal constitutions often borrow heavily from the United States Constitution—for example, some form of separation of powers.”). ) may provide strong but non-exclusive evidence for such capacity. This is an important point for Native governance because a significant number of tribes do not have written constitutions or might not be democracies in the strictest sense. 38 Id. at 123 (“Indian nations have a relatively new tradition of constitutionalism, and some tribes—most notably the Navajo Nation—still have no written constitution.”). It is not the argument of this Article that these tribes must adopt canonical documents establishing the basic machinery of government—whether grounded in separation of powers or another articulated structure of popular sovereignty—to gain the privilege to tax. Instead, robust operations of implicit tribal norms or the reciprocal obligations to tribal members—both in collecting revenue and distributing the proceeds—may be enough. On the flipside, democratic fiscal governance in the territories (or its suboptimal presence) often results not from local resistance. Instead, federal control over and neglect of territorial constitutionalism, coupled with Congress’s distaste for direct spending in the islands, have necessitated the development of tax incentive regimes that further increased inequality. 39 U.S. Const. art. IV, § 3, cl. 2 (“The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States . . . .”); see infra notes 497–500 and accompanying text (describing democracy deficits in and popular desires to amend territorial organic acts). One prominent, recent example of Congress’s reluctance to make a direct fiscal investment in the territories is its failure to make the Supplemental Security Income program available to territorial residents. See United States v. Vaello Madero, 142 S. Ct. 1539, 1541 (2022) (“For various historical and policy reasons, including local autonomy, Congress has not required residents of Puerto Rico to pay most federal income, gift, estate, and excise taxes. Congress has likewise not extended certain federal benefits programs to residents of Puerto Rico.”); Andrew Hammond, Territorial Exceptionalism and the American Welfare State, 119 Mich. L. Rev. 1639, 1641–43 (2021); Zhang, The Origins of U.S. Territorial Taxation, supra note 15, at 556–58. The continuation of such neglect and distaste makes certain forms of territorial taxing power incoherent with second-order autonomy. It also puts the burden on Congress to remedy both the democratic deficit and the persistent impoverishment. 40 Further, this Article’s reference to the territories’ power to tax in place of Congress and to deviate from federal income-tax rules does not imply that the territories make no contribution to the federal fisc. In a previous article, I have detailed how Congress designed territorial tax systems, including their exemption from internal-revenue regimes, “as part of its broader calculus in devising what it sees as the optimal revenue system for the mainland.” That is, territories indirectly bear the costs of federal tax design. Zhang, The Origins of U.S. Territorial Taxation, supra note 15, at 560.

The Article thus aims to integrate Native and territorial issues into the mainstream discourse about taxation. 41 See infra section III.A (situating this Article’s claims within existing scholarship); see also Elizabeth A. Reese, The Other American Law, 73 Stan. L. Rev. 555, 561 (2021) [hereinafter Reese, The Other American Law] (integrating tribal law into mainstream discourse); infra notes 338–371 and accompanying text (analyzing Puerto Rico tax law). This Article primarily discusses the federal law that has shaped tribal (and territorial) fiscal capacity, but its proposed income tax-credit regime enables tribes to develop their own tax laws and policies. Such tribal tax policy, when it emerges, also deserves serious study. It makes three main contributions. First, it evaluates the doctrinal and statutory regimes that govern the taxing powers of Native tribes and U.S. territories. 42 This account is much needed for not only scholarship but also teaching. The standard law school course in U.S. subnational taxation concerns state and local tax. See, e.g., Walter Hellerstein, Kirk J. Stark & Joan M. Youngman, State and Local Taxation at xi–xx (12th ed. 2025) (focusing on state and local taxation). It is therefore the first Article to offer a systematic analysis of the law of subfederal taxation beyond states and localities. 43 See infra notes 397–411 and accompanying text (scholarship on Native taxation); infra notes 412–417 and accompanying text (scholarship on territorial taxation). There has been no substantial scholarly treatment of taxation in the U.S. territories in general (rather than of Puerto Rico alone) in the last four decades. See, e.g., Diane Lourdes Dick, U.S. Tax Imperialism in Puerto Rico, 65 Am. U. L. Rev. 1, 16–83 (2015) (providing a historical account of U.S. economic domination of Puerto Rico only); Karla Hoff, U.S. Federal Tax Policy Towards the Territories: Past, Present and Future, 37 Tax L. Rev. 51, passim (1981) (exploring contemporary and historical treatment of territorial taxation, but predating major reforms in 1986). The literature on tribal taxation focuses on the Supreme Court’s adjudication of state–tribal tax conflicts. See, e.g., Adam Crepelle, Taxes, Theft, and Indian Tribes: Seeking an Equitable Solution to State Taxation of Indian Country Commerce, 122 W. Va. L. Rev. 999, 1000 (2020) [hereinafter Crepelle, Taxes, Theft, and Indian Tribes] (“Several factors contribute to Indian country’s economic despair, but state taxation of Indian country commerce is the most severe impediment to tribal economies.”); Fletcher, In Pursuit of Tribal Economic Development, supra note 14, at 768–74 (offering a comparative analysis of tribal revenue needs); Richard D. Pomp, The Unfulfilled Promise of the Indian Commerce Clause and State Taxation, 63 Tax Law. 897, 911–12 (2010) (analyzing primarily “seminal cases involving state taxation of Indians and those doing business with them and, to a lesser extent, those involving tribal taxation”). No one has examined—to the author’s knowledge—both territories and Native tribes as species of subfederal taxation. Second, the Article deconstructs the concept of fiscal autonomy. It propels both scholarly and policy discussions beyond their current focus on a generalized concept of taxing power. Third, the conceptual framework yields insights for reform. A uniform federal income-tax credit for tribal and territorial taxes paid coheres more with Congress’s promise of fiscal autonomy than the existing regime.

The remainder of this Article proceeds as follows. The Article first provides a comparative analysis of existing law. Part I addresses Native tribes, covering federal tax treatment, tribal taxing power, and interactions between tribal and state tax regimes. It shows (1) how divergent interpretive principles and collision of executive agencies, specialty tribunals, and general jurisdiction courts have led to narrowing federal tax exemption; (2) how the battle between dependent-sovereign and strict-autonomy theories has contracted tribal fiscal capacity; and (3) how the failure of preemption by delegation has forced tribes to engage in intense tax competition with the states. Part II examines territorial tax systems, including the territories’ general federal tax exemption and Puerto Rico’s tax-incentive regime. It shows how the territorial government’s exercise of delegated tax discretion has invited criticism of tax shelter and imperialism. 44 By showing the distinctive echoes of imperialism in contemporary federal tax policy as to tribes and territories, this Article is in conversation with a burgeoning literature that includes: Maggie Blackhawk, The Supreme Court, 2022 Term—Foreword: The Constitution of American Colonialism, 137 Harv. L. Rev. 1, 151 (2023) [hereinafter Blackhawk, The Constitution of American Colonialism] (offering “a long overdue reckoning with American colonialism” and noting that “[t]he horizons of our constitutional law and theory have been limited in many ways by the American colonial project”); James T. Campbell, Aurelius’s Article III Revisionism: Reimagining Judicial Engagement With the Insular Cases and “The Law of the Territories”, 131 Yale L.J. 2542, 2651 (2022) (arguing that “[s]o long as American legal thought overlooks empire’s path dependencies, judicial resolution of its foundational questions will imperil self-determination and invite promise breaking” and “call[ing] for better theories of judicial engagement with the law of the territories . . . and empire’s role in American constitutional development”); see also infra notes 418–419 and accompanying text (collecting scholarship).

Part III builds a framework of fiscal autonomy. It assesses the scholarship about Native taxation, territorial tax policy, autonomy in other forms of subnational taxation, and the constitution of American imperialism. Part III then contends that fiscal autonomy is a twofold concept, incorporating first-order taxing power and second-order governance. It ends with policy and doctrinal reform proposals, including the design of a nonrefundable federal income-tax credit for tribal and territorial taxes paid.