Federal cuts add fuel to the fire: Guam leaders brace for new debate on BPT

By Mar-Vic Cagurangan

Gov. Lou Leon Guerrero reiterated—for the nth time— her call for the Guam legislature to sustain the current business privilege tax rate, warning that the looming federal funding cuts would press the local government to take up the slack.

The renewed focus on business tax takes Guam's budget planners back to where it started: Trump's fiscal policy.

The U.S. House of Representatives is poised to advance President Trump's budget proposal, which includes cuts to Medicaid and food stamps as part of a Republican strategy to find more than $800 billion to help pay for tax cuts.

Lou Leon Guerrero

“If these cuts become a reality, the responsibility to sustain these essential services will fall squarely on our local government. That’s why rolling back the business privilege tax is simply not an option,” Leon Guerrero said.

Sen. Shawn Gumataotao’s Bill 11-38, which proposes to cut the BPT rate from 5 percent to 4 percent, is scheduled for public hearing on June 9.

“For years, we've heard the call to revisit the BPT increase that was enacted as a temporary fix,” said Sen. Chris Duenas, chair of the finance and government operations committee. “With the island still reeling from the high cost of living, it’s time to put everything on the

 table: investment, cuts, and efficiencies. Let's have an honest discussion about our fiscal future.”

The BPT rollback has been a recurring proposal since Leon Guerrero assumed office in 2019, and each time, the governor thumbed it down.

The Calvo administration raised BPT from 4 percent to 5 percent in 2018 as a temporary solution to plug the $67 million revenue gap created by the Tax Cuts and Jobs Act of 2017, implemented during Trump’s first term in office.

However, what was intended as a stopgap measure has since become a permanent policy despite the Guam Chamber of Commerce’s repeated appeals for a rollback.

According to the Office of Public Accountability, GovGuam raised $315 million in BPT revenue in fiscal 2019, which went down to $296.5 million the following year as a result of an economic massacre caused by the Covid-19 pandemic.

Ironically, the pandemic years brought an unprecedented windfall to Guam. According to the Government Accountability Office, Guam received $2.7 billion in Covid-19 recovery funds.

Trump’s return to the White House brought back the specter of shrinking funds, subsequently intensifying the BPT debate on the local front.

Chris Duenas

 “We must preserve the BPT, especially now, as Guam stands at the forefront of a historic military buildup. Large off-island companies are coming here to do business and make a profit, and they must pay their fair share to support the infrastructure and services our people depend on,” Leon Guerrero said.

“These tax revenues are vital to ensuring we can continue to deliver health care, public safety, education, and other core government services for a population that is already growing. I strongly urge our lawmakers to keep the BPT in place. Now is the time to protect our people, not weaken the resources that sustain them,” she added.

Duenas’ committee earlier held public hearings on four other BPT-related bills: Bill 59-38, which requires the itemization of the BPT on sales receipts; Bill 71-38, which seeks to indefinitely suspend BPT on baby products, food, medicine and hygiene goods; Bill 90-38, which recommends permanently increasing 

the gross threshold for small business BPT exemptions; and  Bill 101-38, which

proposes expanding tax exemptions to prescription drugs.

“These proposals show that this conversation is long overdue,” Duenas said. “We cannot keep dancing around the elephant in the room. The real discussion must include whether our government can live within its means, whether tax relief is viable, and whether government services can be delivered more efficiently.”

With regard to federal funding cuts and programs that Guam stands to lose, local leaders are banking on Del. James Moylan to make the case for the territory.

Reiterating her direct message to Moylan in her state of the island address, the governor said, “You are our lifeline to the federal government. You stand on the floor of Congress; you are in the room during Republican budget caucuses. You have close relationships with the Speaker of the House and the House Majority Caucus Chair. These relationships matter, and we hope you can count on them because Guam is counting on you.”

Duenas said Moylan is now equipped with facts and figures to argue for the retention of what Guam has been receiving from the federal government.

“The information is now in his hands, and Guam’s case for continued federal assistance rests on what he chooses to do with it,” Duenas said. “The data is now with Congressman Moylan’s office and we trust they will use it to advocate strongly in Washington for the 780-plus jobs that are essential to the services our people rely on.”

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