Think of a reservation as a Dependent Nation within a nation - that's how it is, and that is how it's always been. Constitutionally it has been held up every time.
Everyone pays federal taxes. If you're a tribal member, and living on the reservation, I'm pretty sure you're not liable for state tax. At least, you're not in this state.
Apparently, I know Nebraska state taxation laws better than you do, then, because there are very few exemptions for indians there when it comes to state taxes. In order to be exempt from income tax there, the income for an individual indian has to have been earned completely within the reservation boundaries. Income (revenue) for businesses, however, are taxable. Indians there pay licensing and registration fees on vehicles, etc... need I go on?
Sure. That doesn't mean it's an intelligent way to run a society.
In order to be exempt from income tax there, the income for an individual indian has to have been earned completely within the reservation boundaries.
That's probably true of a fair fraction of the people in the Winnebago, Omaha and Santee Sioux reservations. On the other hand, I'm not sure many people there have incomes that meet the threshold for state tax.
Look, I don't begrudge anyone anything on the reservation. Ours have the highest poverty rates in the state. Without gambling, they've been a disaster for their own people. The parts of the world that retain tribalism are the same way. This is an artifact of a long-gone era of American politics.