Governor proposes tax cuts for Guam’s small businesses, BPT exemption for Medicaid providers

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Mar 123 min read

Updated: Mar 13

By Mar-Vic Cagurangan

(This story has been updated to include Sen. Vincent Borja's bill responding to the governor's tax cut proposal.)

Gov. Lou Leon Guerrero on Wednesday proposed to raise the threshold for lower business privilege tax for Guam’s small businesses and to provide tax breaks for Medicaid providers.

While large businesses on Guam are currently levied the 5 percent, those with a revenue of up to $500,000 pay 3 percent under the amended Dave Santos Act.

“Tonight, I’m calling on this legislature to go further. Let’s raise that cap to $1 million,” the governor said in her State of the Island address. “Guam cannot be better than it is if we do not have an economy that creates jobs and supports small businesses.”

She also transmitted a bill to the legislature proposing to exempt Medicaid providers from BPT.

“If you treat the most vulnerable among us—the men, women, and children on Medicaid—every cent of that revenue should be exempt from the business privilege tax,” the governor said. “By doing so, we commit new resources to actual treatment, and it may increase the number of medical professionals willing to treat those who need it.”

Responding to the governor's call, Sen. Vince Borja promptly introduced a bill setting $1 million threshold for a reduced BPT to ensure "small businesses get the long-term relief they deserve."

“This is about giving our small businesses room to grow,” Borja said. “We’re listening to our entrepreneurs and business owners who’ve been asking for real relief. By increasing the exemption threshold, we’re making sure they have the financial flexibility to reinvest in their operations, hire more local workers, and keep Guam’s economy moving forward.”

Borja said the exemption would be determined based on a company’s previous year’s gross income and will apply for the full tax year. Businesses earning above the exemption threshold will still pay the standard 3 percent BPT on income exceeding the exempted amount.

The BPT rate was raised from 4 percent to 5 percent in 2018 as an interim solution to alleviate the impact of the Tax Cuts and Jobs Act of 2017 on the local treasury. The administration of then-Gov. Eddie Calvo estimated that the federal tax cuts resulted in a $67 million revenue shortfall.

What was initially designed as a stopgap measure has since been a mainstay in the government of Guam’s tax policy.

The BPT rollback has since been a recurring proposal in the Guam legislature, but Leon Guerrero has consistently opposed the tax reduction, arguing that cutting the rate without identifying alternative revenue streams could jeopardize government programs and services.

Nevertheless, she signed into law the Dave Santos Act amendment in 2022 to provide relief for qualified small businesses.

The latest proposal to roll back BPT from 5 percent to 4 percent was introduced in the 38th Guam Legislature by Sen. Shawn Gumataotao.

“I respect the people who put them forward. But let me be clear about where I stand: I will not support raising the business privilege tax to 4 percent on small businesses paying 3 percent today. These businesses are the backbone of our economy, and they deserve a break—not another burden,” the governor said.

Generally, Leon Guerrero is opposed to tax cuts, saying Guam must grow the local economy, which requires the full return of our tourism industry.

“I will not support another tax break for big businesses or federal contractors making millions on Guam. Not when one of the largest corporate tax cuts in recent memory is likely to pass in Washington D.C.,” she added.

The governor said her new proposals to the legislature are “bigger than politics.”

“Whether you’re a Republican, a Democrat, or somewhere in between, we can agree on this: We should invest in our people, our communities, and the businesses that call Guam home,” she said. “And those who come here to profit from our growth must be willing to pay their fair share.”