Speaker Therese Terlaje today introduced a bill that seeks to shield the earned income tax credit (EITC) funds from inappropriate use.
Bill 175-36 would require the government of Guam to immediately deposit the EITC cash reimbursements into the Income Tax Refund Efficient Payment Trust Fund once they are received from the federal government.
“We should lock away the federal reimbursement for these EITC tax refunds so that the next years’ refunds can be paid within 30 days of processing,” Terlaje said.
The American Rescue Plan Act of 2021 provides that Guam would get a 100 percent cost reimbursement from the federal government for EITC obligations to the government of Guam beginning in 2021 and for all following tax years.
Prior to the enactment of the ARP, the EITC program was an unfunded federal mandate that compelled Guam to tap into local funds to fulfill such an obligation.
The program, which provides tax breaks for low-income families, costs Guam between $55 million and $60 million annually.
“We have been told time and time again by multiple administrations that the timing of the payments for tax refunds is dependent on the amount of cash available to make the refund payments, but we know that the working families that qualify for the EITC are often the ones who are in dire need of their tax refunds and it should be our duty to ensure the government pay these refunds immediately, rather than borrow them for other government services,” Terlaje said.
Bill 175-36 would ensure that GovGuam has a sufficient amount of cash to quickly pay all tax refunds eligible for the EITC refund by requiring immediate deposits of the EITC cash reimbursements from the federal government into the Income Tax Refund Efficient Payment Trust Fund.
“This will also relieve the pressure on the general fund ensuring that the payment of all types of refunds can be made sooner rather than waiting for up to six months,” the speaker said.
Before the EITC cash reimbursement is used for any other purpose, Bill 175-36 will allow GovGuam to catch up on tax refund payments and ensure enough cash is available in the Trust Fund to make swift tax refund payments for the entire tax year.
In 2001, prior to being a senator, Terlaje represented the 25th Guam Legislature as legal counsel in the original EITC case brought before the Supreme Court of Guam to compel the government of Guam to implement the EITC program for working families. The EITC aims to reduce poverty by supplementing the earnings of low-wage workers and by rewarding work.