Calif. Vote on Indian Tribe Gambling Tax

Two controversial propositions on the California ballot this November ask voters how much Indian tribes should pay in taxes.

Tribes that run casinos currently enjoy a multibillion-dollar monopoly on Golden State gambling while paying no taxes. Proposition 68 (search ) would force tribes to hand over 25 percent of their revenues or risk facing competition from non-tribal gaming outfits such as racetracks. Under Prop. 70, gaming tribes would pay an 8 percent tax –- the same rate as California corporations –- in return for unlimited slots and other forms of gaming.

But the most famous opponent of the propositions, Gov. Arnold Schwarzenegger (search ), says neither proposal would result in gaming tribes paying "their fair share."

"Both [propositions] are from special interests looking for special treatment," Schwarzenegger says in a TV ad.

Schwarzenegger opposes Prop. 68 because it may expand gaming to racetracks. He also says Prop. 70 will allow gambling to creep into urban areas.

Schwarzenegger says he prefers the existing law, which allows him to negotiate tax rates with the tribes. He has negotiated new pacts in which the state receives about 13 percent in taxes, higher than the corporate rate but not the 25 percent the governor lobbied for during his electoral run.

Gaming tribes have already begun buying up land next to large urban areas. Once the land is certified as a "reservation," tribes can open casinos. One San Francisco Bay site is approved for 5,000 slots. Others are earmarked for San Diego, Sacramento and Disneyland.

While polls show Props. 68 and 70 are probably headed for defeat, experts predict California tribes stand to bring in more money than Nevada casinos within five years.

Click on the video box near the top of this story to watch a report by FOX News' William La Jeunesse.