Pass an Ordinance, Collect $3000: Taxpayer Money Hard at Work

The Navajo Nation’s Local Governance Act, passed in 1998, allows communities to take over some governmental functions and administer them at the local level, effectively relaxing the centralized government’s control over community development. These functions include leasing tribal property to commercial and residential prospects as well as passing local ordinances, such as enacting a local sales tax.

The Tuba City chapter of the Navajo Nation was one of the first communities to gain this authority and by February 2010 had enacted their own 2% sales tax to be collected and distributed locally. The day after the community’s voters approved a tax rate of 6% (4% of which goes to Navajo Nation), each of the chapter’s five council members congratulated themselves with a $3000 bonus. As they worked to secure the ability to lease property to businesses, over time they each received four $1000 rewards.

In all, from 2009 to 2011, these five council members awarded themselves $80,000 in bonuses, which is a particularly offensive sum when you compare it to the annual per capita income of Tuba City residents at $15,000. On top of these special compensations, one member abused reimbursement funds by receiving large travel stipends for trips she never went on and reporting excessive meal costs. These exploitations eventually caught the attention of their liaison who promptly froze all accounts and launched an ongoing investigation. Four of the five members have been fired and all have been forced to return the money they pocketed.

It’s difficult to understand why Tuba City’s local authorities thought this allocation of sales tax revenue wouldn’t draw attention – which is not to say they didn’t try to avoid scrutiny. They reportedly resisted requests to submit their annual financial reports to their Navajo liaison. Compounding the legal aspect of this abuse is that current Navajo legislation doesn’t enforce regular reporting of financial activity; there is an online application where chapters can voluntarily report their spending but the Tuba City Tribal Council posted very little information. It’s not clear how the rest of the 2 million in revenue that’s been generated since enactment was spent, although it appears that not much was dedicated to supporting emergency and other essential services.

This serves as a prime example – albeit an extreme one – of why taxpayers who are against giving their money to government agencies that spend as they deem fit are justified in their skepticism. Flagrant abuse of taxpayer funds for personal gain is never acceptable – but in this economy and in poor communities it comes across as especially contemptible.

Stay tuned here at our blog to learn more about interesting goings-on in the sales tax arena!