Today's Challenges

Proportionally, twice as many Native Americans live in poverty versus the total population. Over 25 percent of Native Americans earn less than the poverty rate. Of all Americans, only 12.4 percent are in poverty. But there are bright spots.

• While the poverty rate among Native Americans is uncomfortably high, the 2000 Census rate of 24 percent is a significant decline from the 1990 rate of 31 percent.
• At least in some regions, the growth of Indian-owned businesses is higher than growth of the number of new firms in general. In Minnesota, for example, the number of Indian-owned companies rose by 14 percent, while the number of firms overall increased only 8 percent.
• Between 1987 and 2002, the number of new Indian-owned firms increased 225 percent in Montana, 159 percent in North Dakota, 248 percent in South Dakota and 74 percent in Wisconsin.

As with any enterprise, Native Americans have some advantages and many disadvantages in starting a business. Under several recent revisions of the U.S. tax code, there are certain tax breaks that tribal sovereign enterprises enjoy. Many tribes don't pay property, sales or income taxes to the states. They are also exempt from certain excise taxes, like cigarette and gasoline taxes.

Also, various city, state and federal programs give preference or set aside a percentage of their procurement budgets for minority-owned businesses. So, if a tribe or a privately owned business can demonstrate its minority status and get an "8(a) certification" from the Small Business Administration, the firm might be able to land lucrative government contracts. This can be both an advantage and disadvantage.

In 1975, A&S Tribal Industries (ASTI) was a company in Montana set up by the Assiniboine and Sioux tribes that had military contracts and 500 employees making camouflage netting and medical kits. But when defense spending dried up in the 1990s, ASTI dropped to four employees. The company restructured and went after commercial clients making ice cream machines and thermal stone ovens. That diversification and the return of defense contracts helped the company come back.

There are other disadvantages. Under the 1887 Dawes Act, the reservations were split up into private landholdings. Over the years, the original land allotments have been subdivided to each successive generation. Some plots of land now have over 1,300 owners. On the Standing Rock Reservation, there is one tract of land that measures 5-inches by 5-inches. Obviously, a bank is not going to take that plot of land as collateral for a small business loan.

Another disadvantage can be the tribal government itself. For-profit business enterprises have different goals than tribal governments. The business is there to serve the customers, maximize profits for its owners and stay in business. The tribes are interested in providing as many jobs as possible. The two goals can be at odds with each other.

Several studies have shown that Indian enterprises have the best chance to succeed if they are separate from direct tribal government oversight or control, even if the start-up money comes from tribal funds.

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