Federal Tax Law Trumps Indian Canon

Abstract

On November 27, 2001, the Supreme Court ruled in Chickasaw v. United States that Native American gaming (NAG) firms are subject to federal excise and occupational taxes. Prior to the decision, these firms had been exempt from all federal taxation. We hypothesize that Chickasaw improves the competitive position of publicly traded gaming firms and their suppliers by leveling the playing field for publicly traded firms. Consistent with this argument, we find that the stock prices of publicly traded gaming firms and their suppliers reacted positively to the announcement of the Chickasaw Supreme Court and Tenth Circuit decisions. We also hypothesize that Nevada casinos are relatively insulated from competition because they offer a unique experience that is not easily replicated by NAG firms. Consistent with this argument, we find smaller stock price reactions for firms with Nevada operations.