Leon Guerrero says specter of 2018 tax cuts haunting GovGuam finances
Governor nixes new BPT rollback proposals
The Trump Tax Cuts and Jobs Act of 2018 continues to affect the government of Guam’s finances, Gov. Lou Leon Guerrero said, rejecting fresh proposals to slash the business privilege tax. “Everyday, I look at our government’s cash report,” the governor said in her presentation at the Guam Chamber of Commerce’s general membership meeting Wednesday.
“More recent analysis by my fiscal discipline team has revealed the true impact of the Trump tax cuts to be $86 million—$86 million that could have been used to hire public safety officers, increase the salaries of our nurses and teachers, or rebuild Simon Sanchez High School.”
The sweeping tax reform trimmed individual tax rates, lowering the top rate from 39.6 percent to 37 percent. Corporations also saw their levies fall, as their income tax rates declined from 35 percent to 21 percent.
Although local taxpayers do not pay federal tax, Guam mirrors the Internal Revenue Service Code, which means any amendment to the federal tax law applies to Guam.
“Over the last three fiscal years since 2018, we’ve lost nearly $200 million of our normal revenue stream because of the Trump Tax Cuts and this pandemic,” Leon Guerrero said. “We can’t expect to maintain the current levels of government services—we can’t help your business grow, care for the sick, keep your families safe, give your children quality education—if we reduce the BPT.”
The Calvo administration raised BPT from 4 percent to 5 percent in 2018 to cover the revenue loss estimated at $67 million resulting from the Trump tax cut. Leon Guerrero has repeatedly opposed BPT rollback proposals that have been popping since 2019. In the 36th Guam Legislature, two pertinent bills are pending. Sen. James Moylan has reiterated his earlier proposal to cut BPT from 5 percent to 4 percent. Sen. Mary C. Torres has proposed a two-phased rollback. The governor will not back down from her stance. “With the one-percent increase in BPT, in Fiscal year 2019, we were able to generate an additional $77.8 million. But we were still $8 million short. So we identified areas we could cut without decreasing services,” she said. “We are in a serious crisis, and it requires me as your governor to not just look at the bottom line. It requires me to continue to provide a social safety net for our people without sacrificing a person’s dignity to a decent job,” she added. The governor said GovGuam deficit has been cut in half from $83 million to $47 million in just one fiscal year—paying liabilities that have been on the books for decades.
She said collections increased in 2019 by $27 million above adopted revenues and brought tax evaders to the Attorney General, totaling $5.9 million.
“But just as we were fixing our fiscal ship of state, the economic devastation caused by the pandemic further exacerbated the situation by another $100 million,” Leon Guerrero said. “While we cannot take this risk right now, the Biden Administration may very well review and reverse the Trump Tax Cuts. If and when that happens, I am open to exploring these calculations and come back to the table.”
In Washington D.C., Biden has called for rolling back the Trump tax cuts on people making above $400,000 a year and to partially reverse the reduction in the corporate tax rate. But Republicans are positioning to protect their 2017 tax-cut law.
The governor, who has been at odds with the Chamber of Commerce, said her administration has always supported local businesses. “With the amendments to the Dave Santos Act, we’ve cut taxes for our smallest businesses prior to the pandemic. These tax cuts enjoyed bipartisan support, and now 85 percent of taxpayers who file GRT—businesses making $250,000 or less in gross annual income—pay a 3 percent BPT —not 5 percent.”
Before the pandemic, she added, business owners already received a nearly 50 percent cut in their income taxes while the government was forced to do more with less.
"I know we don’t always see eye to eye but you and I share the same goal: building a better, stronger Guam," she told the Chamber members. "My decisions haven’t always been the most popular and perhaps not always exactly right, but always in the best interest of our island and our people."
While the pandemic has entailed so many challenges, it also presents new possibilities.
"As I reflect on what we’ve done and all that we’ve been through, I pray that history will tell the story of the great and many sacrifices each of us had to make when confronted by this invisible enemy," the governor said.