In the 1971 case of McClanahan v. Morauer & Hartzell, Inc., et al., the U.S Supreme Court addressed a dispute over taxation on an Indian reservation. The plaintiff, Pauline McClanahan, was a member of the Navajo Tribe living and working on her tribe's reservation in Arizona. She argued that she should not be subject to state income tax because federal law preempts it. The defendants were officials from Arizona who claimed that they had jurisdiction to impose taxes since there was no explicit prohibition by Congress against such action. The court ruled in favor of McClanahan stating that absent cession of jurisdiction or other federal statutes permitting it, a State is without power to tax reservation lands and reservation Indians. It held that states do not have authority over Native American tribes unless explicitly authorized by Congress; this includes imposing state income taxes on tribal members whose income comes from activities within their own reservations.

In the dissenting opinion for McClanahan v. Morauer & Hartzell, Inc., et al., 1971, it was argued that the majority's decision to uphold Navajo tribal jurisdiction over a civil suit involving a non-Indian defendant and an Indian plaintiff on reservation land was inconsistent with previous court rulings and federal policy. The dissent emphasized that while tribes do retain some inherent sovereignty, this does not extend to exercising jurisdiction over non-members in civil cases without express congressional authorization. It also highlighted concerns about fairness and due process for defendants who may be unfamiliar with tribal law or customs. Furthermore, it suggested that allowing such broad tribal authority could potentially undermine state sovereignty and create confusion around jurisdictional boundaries.