In the past, courts have described American Indian sovereignty in ways that suggest the existence of power in the Navajo Tribe to tax the activities and property of non-Indians on their reservation. These judicial statements were made, however, at a time when tribal governments were viewed as transitional mechanisms for Indian assimilation, and contact between Indians and non-Indians on the reservation was minimal. Current efforts by non-Indians to develop energy resources on the Navajo Reservation will result in greater benefits for the Navajo people if the Navajos can exercise taxing power to the exclusion of the states. Since large-scale taxation assumes and permits the growth of a permanent, complex tribal government, legal doctrine and legislative schemes may alter as the Navajos assert themselves. Changes in the definition of tribal sovereignty and the extent of Federal and state limitations on taxing and other tribal powers should be anticipated if the Tribe begins taxing non-Indians. Navajo taxing power over non-Indians seems to have a firm basis in current judicial doctrine. There are few Federal restraints on such tribal power, but Federal restraints may be increased via the Indian Civil Rights Act, especially in terms of homogenizing tribal with state/local government wherein freedom from state taxation would require the Tribe to assume some state functions. (Author/JC)