By 8-7 vote, Legislature passes temporary business privilege tax increase and first-ever Guam sales tax and gives Governor Calvo more power to consolidate or cut government agencies to respond to $67 million shortfall due to Trump tax cuts.
Governor Eddie Baza Calvo got what he said he had been pushing for, with the narrow passage of the administration-approved fiscal measure. “We have a road map now and that’s a great start! But there’s more that needs to be done. We’ll work with Senators to reorganize the government. I look forward to working collaboratively to build a more efficient government, and provide security and stability for our people," Calvo said.
But Sen. Michael San Nicolas, who voted no, hastily drafted a billa bill and submitted it to the clerk of the legislature to kill the sales tax before it is even enacted into law.
Those who voted for the measure who spoke after its passage suggested they did so only reluctantly and in response to pressure over the impending fiscal shortfall. That pressure has come in the form of cuts in government services already imposed by the governor and threats of furloughs and layoffs of GovGuam employees.
Vice Speaker Therese M. Terlaje was a no voter. "It puts a sales tax on all families. All retail and service transactions regardless of income or struggle. It tells the people, this legislature has no issue with the executive's spending priorities in times of crisis. And that it's OK for the executive branch to cut less than they originally promised going forward. But on top of all this, one person receives in good faith from this bill, the power to reorganize, to wipe out services and missions of the government that our community has demanded. And I truly hope that this good faith is well placed..
"I appreciate the hard work of all of my colleagues in this effort and I sincerely hope that the passage of this bill will stop the fear that is being used to propel it. The intentional promotion of fear in our students that their teachers will be furloughed, in our retirees that their health insurance will not be paid, that ambulances are being parked for our benefit. It is time to work harder and to face head on our vulnerable economy, our vulnerable political status, so that we can insulate those who come after us from whim and fear and unilateral priority setting for our entire community."
The tax bill imposes a temporary 25 percent increase to the business privilege tax by raising the current 4 percent rate by 1 percentage point, to 5 percent. That would remain in place until the end of the fiscal year on Sep. 30.
After the BPT increase expires, on Oct. 1, the 2 percent sales tax would take effect, allowing time for the adoption, review and legislative approval of the rules and regulations governing the administration of the new tax.
Sen. Frank Aguon described the passage of the tax bills as "a strong dose of bitter medicine that everyone will be forced to swallow so that this administration can realize a quick infusion of actual cash," albeit "a band-aid solution."
"I have remained steadfast in opposing any tax increases that would further burden our People who have repeatedly expressed their opposition to bail out a government that is operating beyond its means. In response to our People’s concerns on what the government is actually doing to reduce expenses," Aguon said.
His successful amendment grants the governor broad authority to get his financial house in order by prioritizing funding to education, health, and public safety through government reorganization.
"I was also successful in passing an amendment to exempt sales taxes from being applied to the purchase of liquid or diesel fuel at gas stations.," Aguon said. "Not more than 3 months ago the increase in liquid fuel tax took effect, and our people are already feeling the pinch at the gas station. Moving forward, I will remain hopeful and willing to work with my colleagues and with this administration to restore all law enforcement officers and emergency responders to their respective agencies to continue their mission to protect our community, to fully fund the Guam Department of Education, and to work on fiscal policies that will further support our only public hospital."
In seeking to repeal the bill, San Nicolas said, "This sales tax is expected to take $160 million a year from our taxpayers according to its sponsor, that's money that comes from the pockets of everyone on this island. This tax disproportionately affects the working class and it will increase the cost of living for many families that are already living paycheck to paycheck."
The newly passed bill calls on the governor to submit a revised fiscal realignment plan prior to the BPT increase, though that plan doesn't need legislative approval for the BPT increase to kick in.
Apparently May 20 is the earliest that the revenue from these 'emergency measures' might start flowing into the treasury.