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.
True enough, but then again we are a people/cultuure/society that pre-dates America - which is apparently how the feds look at it. That, and they think we are all too stupid to take care of ourselves - something that even people off the reservation are starting to see as well...