50 Years Ago: Trying to get Navajos to pay federal taxes wasn't easy in the '60s

As 1965 drew to a close, Navajo tribal officials were becoming more and more concerned about the decisions being made by U.S. President Lyndon Johnson to increase the nation’s involvement in fighting in Vietnam.
The concern was not about the lives this increased involvement would have on tribal members – two Navajos had already died in the war, but how much it would affect funding for Navajo programs.
Johnson had already told members of Congress that increased U.S. military presence in South Vietnam would add billions of dollars to the budget and he pledged, as much as possible, to take these funds from existing programs.
To Navajo Tribal Chairman Raymond Nakai, that meant Indian programs because reductions here would have practically no political backlash for Johnson.
In fact, there was a segment of the American population – the conservatives on the Republican side – who were saying that the federal government was spending too much on Indian programs.
All of this was somewhat of a political problem for Nakai since he campaigned heavily for Johnson in 1964 and managed to get a lot of support for Johnson within the Navajo population.
But Arizona Rep. Duke Senner came to the reservation on December 20 and told tribal officials not to worry – he didn’t expect any major cutbacks in Navajo programs, at least for the immediate future.
Senner came to the reservation to give a $12,000 check to Lenard and Art Arviso, owners of the Window Rock sand and Gravel Company. The Arvisos, in the 1970s, would become major supporters of Peter MacDonald and would hold high positions in MacDonald’s administration.
The $12,000 was a loan from the Small Business Administration, and the person who helped them get that loan was MacDonald, who, at that time, was director of the Navajo Office of Economic Opportunity.
Senner also had a $13,100 check, another small business, that he gave to Oscar House, owner of the House Television sales and Services.
When he was asked by a reporter for the Navajo Times – there’s no record on who that was – about government funding of Navajo programs for 1966 and 1967, Senner said recent government cutbacks in spending for national programs would not affect the Navajos.

The reasons were simple.
The need to fund these programs was so great it would be a political liability for Johnson to even think of cutting back on Navajo programs.
He pointed out that the average per capita income of Navajo families that year was less than $1,000 and many Navajo families were existing with less than $500 per year coming in.
These figures came from the U.S. Department of Labor but the problem with them, which would come to light several years later, was that much of the income earned by Navajos was not being reported on their tax returns.
In fact, only a small portion of Navajos even filled out federal income reports, in part because no one was forced to and many would not be able to understand the process because English was their second language.
Internal Revenue Service officials knew this but in statements made during the 1960s, IRS officials would say that they could not figure out a way of figuring how big the underground economy was on the Navajo Reservation.
So much of the economy on the reservation was in cash or through barter.
Many Navajo families were still piling up debt at reservation trading posts and paying the debts off during lambing and wool seasons. A large percentage of the Navajo population also earned income from weaving rugs or making silver jewelry.
The IRS had no way of monitoring this, and the decision not to try was because the cost of monitoring the underground economy would be way more than what the government would be able to bring in through taxing.
By the late 1970s, things had changed on the reservation and the IRS was beginning to see increases in the amount of taxes Navajos paid and the percentage of Navajos who were filing tax reports.
Part of this was because of MacDonald and Richard Nixon.
In the early 1970s, job creation peaked on the reservation as MacDonald secured more and more federal funding and because of Nixon’s program to turn over the supervision of federal programs to the Navajo government. By having more Navajos earn wages, the federal government was able to finally get an idea of who was making what and require them to fill out income tax forms.
Then as convenience stores began opening up and trading posts began closing down in the 1970s, Navajo families found themselves paying as they went instead of buying on credit at the trading post.
Then in the 1980s, the IRS found a way of getting Navajos to pay taxes on their manufacture of rugs, jewelry and pottery. Instead of requiring Navajos to report their income, the IRS passed regulations requiring traders and Indian arts and crafts store owners to provide the IRS with documents showing their payments to their Navajo silversmiths and rug weavers.
With this knowledge, the IRS, for the first time, could start monitoring a lot of the arts and crafts sales on the reservation and requiring craftspeople to fill out tax forms.
Of course, Navajos could and did sell a lot of their crafts directly to the customer, but IRS officials were happy to be able toÊget even a portion of the sales documented.

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