Study Forum

The Mackinac Center’s statistical model accounts for the presence of American Indian reservations in a state, though it does not attempt to measure the specific degree of sovereign nations’ contribution to tax avoidance, evasion. Also, it does not attempt to quantify how much revenue nontribal businesses will lose when smokers increase their purchases from tribal businesses.

Some believe that tax compacts between states and tribes reduce the role played by reservations in smuggling, but that may be naïve. Squeezing one side of a balloon only expands the other. Stripping people of an incentive to shop for cheaper smokes at tribal smoke shops may do little to quash the ability of individual members to distribute them on their own accord. Also, since Oklahoma’s compacts generate $70 million in rebates to tribes, they provide an advantage for tribal cigarette and ancillary retail sales over nontribal businesses. (The rebates result in additional cash flow, thus making the cost of business lower)