Guam's business tax hike in effect for seven years, with nothing to show for it

Business leaders made a case for BPT rollback during a public hearing held by Sen. Chris Duenas' finance and government operations committee on June 9, 2025.

By Jayvee Vallejera

The business privilege tax increase, which was intended to be a six-month stopgap measure implemented in 2018, has been in effect for seven years. Yet, the government of Guam's performance has worsened, according to a business leader.

“Take a look around. Have the problems that existed at (Guam Memorial Hospital) at that time gotten better or worse? Is GMH financially solvent?” said Matthew Hunter, chairman of the Guam Contractors Association. “The sad fact is GMH is worse off today than it was in 2018.”

The Guam Department of Education is in the same boat, Hunter added, noting that Guam’s public schools are “crumbling right before our eyes.”

Hunter was among the several business leaders advocating for the passage of Bill 11-38, which would cut the BPT rate from 5 percent to 4 percent.  

“The sad fact that has been proven time and time again is that no amount of additional money will fix the problems faced at GMH and DOE or any of the other problems faced by other departments within the government,” Hunter said in his written testimony.

“We just continue to throw good money after bad, hoping for different results, and I hate to say it, but that is the definition of insanity—trying the same thing over and over expecting different results," he added.

Business leaders made a case for BPT rollback during Monday’s public hearing held by Sen. Chris Duenas' finance and government operations committee.

“Bill 11-38 recognizes that when businesses continue to struggle and ultimately

decide to close up shop, adjust staffing levels, or forgo employee benefits, this means less revenue for the government,” said Sen. Gumataotao, the bill’s author. 

“Unfortunately, despite collecting more taxes and paying its workforce more than ever before, including higher employer rates for retirement and medical insurance contributions, the government of Guam needs the vision and urgency to prioritize tourism recovery and improvements to the delivery of critical public healthcare, safety and education services," he added.

Formerly known as gross receipt tax, BPT was raised from 4 percent to 5 percent as a temporary measure to fill the gap created by the Tax Cuts and Jobs Act of 2017 during President Donald Trump’s first term. 

“We are not asking for a tax cut; we are asking to terminate the ‘temporary’ BPT amount and return to the original amount,” said Robbi Crisostomo, part owner of Harley-Davidson of Guam and Fizz & Co. Soda Shop.

Mark Baldyga, CEO of Baldyga Group, said that since the Covid-19 pandemic decimated tourism, the business sector has been left trying to regrow the island’s primary economic engine, with minimal resources and a disproportionate tax burden.

Bill 11-38 “acknowledges this imbalance and takes a crucial step toward restoring fairness and sustainability,” Baldyga stated in his written testimony.

“Every dollar means a great deal during this critical time and even 1 percent or 2 percent of sales is meaningful towards our efforts at maintaining jobs and payroll," he added.

Ernie Galito, past chairman of the Guam Chamber of Commerce, described Bill 11-38 as “fair, responsible and timely—the kind of policy we need in 2025 to ensure a stronger, more sustainable economy in the years ahead.”

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The Guam Women’s Chamber of Commerce noted the need to examine its impact on GovGuam's finances.

“While we support the bill’s intent to create a more dynamic and resilient business climate, we feel the public and business community should have a better understanding of what the impacts are, as well as how the government plans to either cut spending or increase revenues to adjust for this significant impact,” it said.

GWCC pointed out that the same tax cuts Trump implemented during his first term are looming anew—this time with even more federal cutbacks tacked on.

Trump’s One Big Beautiful Bill Act, now pending in the U.S. Senate, would cut spending on the Supplemental Nutrition Assistance Program and Medicaid.

“It will be important for local lawmakers to understand how these federal tax and spending changes will impact us locally, as we may find ourselves in a similar situation as the one [that] prompted the BPT increase in 2018,” GWCC said.

GWCC endorsed Gov. Lou Leon Guerrero's earlier proposal to raise the small business revenue threshold under the Dave Santos Act from $500,000 to $1 million, which would subsequently expand the number of small businesses benefiting from the lower 3 percent BPT rate.

Roseann M. Jones, dean of the University of Guam’s School of Business and Public Administration, gave a measured economic analysis of the proposal.

She described Bill 11-38 as a reasonable policy response to current economic conditions, with expected net positive effects for Guam’s consumers and businesses.

However, she said this must also be coupled with strict monitoring of revenue outcomes to ensure GovGuam’s fiscal stability.

“The 20 percent reduction in business tax burden provides meaningful operational relief. Consumer benefits will likely be partial but still significant for household budgets. Revenue impact is substantial but manageable within the government’s broader fiscal planning,” she said.

Based on standard economic models, this should benefit both businesses and consumers.

Not all businesses will pass on these savings to their consumers in the form of lower prices, she said, but they will likely reinvest the money to buy new equipment, increase wages, or hire more people.

The tax reduction, however, would mean a loss for GovGuam. “A one percentage point reduction in BPT equates to a 20 [percent] reduction in BPT revenues. This represents a significant fiscal impact requiring careful fiscal management to safeguard [GovGuam’s] essential obligations for education, public safety, and other core services,” Jones said.

GovGuam raised $315 million in BPT revenue in fiscal 2019, according to the Office of Public Accountability.

Several variables remain uncertain. It is unclear whether the revenue earned from any new business activity resulting from the lower BPT would be enough to offset the lost revenue.

Consumer spending patterns, business investment decisions, and federal government policy actions also remain unknown.

“Monitoring mechanisms can provide accountability and inform future policy decisions,” Jones said.

Another suggestion is to include a sunset provision that ensures legislative oversight and prevents permanent policy commitments based on incomplete information.

Jones said these safeguards will provide mechanisms to track effectiveness and adjust as needed. “This approach balances the need for economic relief with fiscal responsibility and public accountability,” she added.

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