Guam senator hits governor over 'giant policy shift' on BPT, suspects backdoor deal with Republicans

GovGuam risks losing $80 million a year from BPT cut, Democrats warn

By Jayvee Vallejera

Gov. Lou Leon-Guerrero, who has vigorously defended the 5 percent business privilege tax over the last seven years since assuming office, is now facing criticism from her fellow Democrats in the legislature for taking the Republican position of cutting the levy.

Sen. Chris Barnett suspects that Adelup and the Republican majority might have struck a deal to ram through the 4 percent BPT proposed in the governor's revised fiscal 2027 spending plan.

Chris Barnett

“I don't know what deal was made here. Maybe the deal was to hand off the hospital in Mangilao because now, it looks like the majority wants to rush this bill through. They don't want to look at it chapter by chapter and you have to wonder why,” Barnett said at the second round of budget deliberation.

The BPT was raised from 4 percent to 5 percent in 2018 as a temporary measure to address revenue shortfalls resulting from federal tax cuts. Despite repeated rollback proposals, the rate lasted for years until the Republican-led 38th Guam Legislature managed to bring it down.

In the fiscal 2026 budget law, BPT was scheduled to drop in two phases—from 5 percent to 4.5 percent effective October 2025, and then to 4 percent beginning October this year.

In the revised budget bill, the governor seeks to keep the 4 percent through fiscal 2027, as proposed by Republicans.

Barnett recalled that Leon Guerrero had staunchly opposed lowering the BPT throughout her term, yet her revised budget bill indicates a “giant policy shift.”

“It appears the governor has either caved or cut a deal, and I think both are unacceptable,” he added.

Barnett also rapped his colleagues for failing to develop a strategic plan to recover the $80 million that would be lost.

Sen. William Parkinson said the BPT cut is a permanent tax cut worth $80 million a year for the wealthiest businesses in Guam.

William Parkinson

Parkinson, a Democrat, accused the Republicans of sacrificing Guam’s healthy finances to give a permanent tax cut to wealthy businesses. 

“Never once in all of this discussion has there ever been a plan, a vision for how this reduction in government revenue leads to Guam's greatness,” he added.

Parkinson said Guam's reserve funds earned from higher BPT are now being sucked out by tax cuts. 

Concerns over Guam’s reserve funds are therefore not surprising, Parkinson said, noting that “this is exactly what we are dipping into to pay for these tax cuts for the very, very wealthy.”

Parkinson said the legislature can negotiate and compromise on keeping a 4.5 percent BPT “if we all stick together.”

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With Guam experiencing a building boom due to the U.S. military buildup, now is not the time to lower the BPT, Barnett said.

Parkinson agreed. He said Guam is in the middle of a massive military buildup, “and we are not thinking about potentially tapping those businesses that aren't from Guam.” 

Barnett said Guam businesses themselves were very clear and honest that lowering the BPT would not lead to higher wages or lower costs at the cash register. 

Sen. Chris Duenas, who presided over the committee of the whole, sharply rejected the accusation that Republicans were just catering to big-business friends and the Guam Chamber of Commerce. He said this is “another disingenuous trick on this floor that I reject.” 

Budget Director Lester Carlson denied any collusion between the administration and the Republicans.

He said during a meeting with the governor, there was a consensus on the lack of political will for 4.5 percent, so the 4 percent proposal was the practical alternative. 

When asked point-blank if any of the senators made a compromise deal with the governor, Carlson replied: “Just for the record, no, there was no deal. There was no colluding. There was none of that stuff." 

Lester Carlson

Sen. Telo Taitague, a Republican who has proposed to keep the 5 percent rate for defense contracts, said Guam stands to lose $33 million should the BPT cut apply to the military segment.

“The cliff is coming. As somebody said, it is. And we just made it worse,” she said. 

Tina Garcia, administrator of the Guam Economic Development Authority, said Guam can expect to collect $165 million from the Department of War each year if the BPT is at 5 percent. If the BPT is at 4 percent, Guam would only be able to collect $130 million a year.

She clarified that the BPT would be shouldered by the Department of War—not by contractors or businesses on Guam.

Garcia said the department's gross receipts tax payments made on the U.S. mainland are the same as Guam's BPT.

Barnett also didn’t mince words about a proposal to put the Guam Department of Education under DOA’s accounting purview and to increase the procurement threshold that would trigger the attorney general’s review.

He described the first proposal as a “lame duck power grab of GDOE finances” and the second proposal as an attempt to circumvent legal reviews.

That prompted Carlson to attempt a response, but he was interrupted by Barnett and then cut off.

Carlson said increasing the procurement threshold for mandatory attorney general review is primarily intended to prevent a backlog of contracts requiring AG review.

Carlson said several contracts are stuck at the Office of the Attorney General. “And so we can't move forward,” he added. 

He said the governor’s proposal identifies a logjam and offers a solution.

Administration Director Edward Birn pointed out that the $500,000 limit was first set in 2010 to limit the number of protests. He said this has been achieved.

Sen. Sabina Flores Perez is concerned that the government may overspend if the revised budget bill passes into law as is.

She said GovGuam’s revenue tracking may not be accurate because what appears in collections may not reflect what is actually obtained in cash. 

Many of the add-ons to the governor’s revised budget bill also require public hearings, Perez said. 

“We don't have the public auditor here. We don't have the stakeholders who are going to be affected and we don't have the public seeing the impacts or at least being able to provide testimony,” she added. 

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