Reducing Guam’s business privilege tax

By Joseph B.D. Arriola

The difficulty of reducing Guam’s business privilege tax from 4.5 percent back to 4 percent is not the result of economic inevitability. It is the product of deliberate administrative choices that structurally tied government operations to the higher rate.

The same pattern applies to the earlier increase from 4 percent to 5 percent. That increase was explicitly sold as temporary, a short-term measure to stabilize government finances. Yet the current administration made decisions that ensured the temporary increase became effectively permanent. The obstacles to rollback were not inherited; they were engineered.

The first structural barrier is the expansion of recurring costs during periods of elevated revenue. When the BPT rose from 4 percent to 5 percent, the administration did not treat the additional revenue as a bridge. Instead, it expanded programs, increased staffing, and entered long-term contractual commitments.

These are obligations that require sustained funding. Once recurring costs rise, rolling back the tax becomes mathematically impossible without eliminating positions, canceling programs, or cutting services. By expanding permanent spending during a temporary tax period, the administration ensured the higher rate would become the baseline.

Second, agencies were allowed to normalize the increased revenue. Budgets were drafted assuming the 5 percent rate was permanent. Operational plans, procurement schedules, and staffing levels were built around the higher intake.

When the rate was later reduced to 4.5 percent, agencies framed the change as a “cut,” even though it merely returned the tax closer to its original level. This normalization was not accidental. It was a strategic choice that made any rollback appear fiscally reckless, even when the rollback was legally and politically promised.

Third, the administration expanded political and administrative overhead rather than using temporary revenue to stabilize essential services. Growth in political offices, advisory roles, and administrative layers creates structural resistance to tax reduction.

Political offices rarely shrink voluntarily. By using temporary increases to expand political infrastructure, the administration created a constituency for maintaining the higher rate indefinitely.

Fourth, the government failed to create any rollback contingency plan. A responsible administration would have capped spending, created reserves, and established a phased reduction strategy. None of these steps were taken. The absence of a rollback plan is itself evidence of intent: the administration did not expect, or did not desire, to return to 4 percent.

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Fifth, the higher rate allowed agencies to mask inefficiencies. Increased revenue reduces pressure to reform outdated systems, streamline procurement, or confront operational waste. Rolling back the tax would expose these inefficiencies and force uncomfortable reforms. Maintaining the higher rate avoids that reckoning.

Finally, the administration tied the increased revenue to public-facing promises—grants, initiatives, and programs that are politically advantageous but financially unsustainable at 4 percent. Rolling back the tax would require admitting that these promises were made without long-term funding.

In sum, the difficulty of reducing the BPT is not accidental. It is the predictable outcome of deliberate administrative choices that expanded spending to consume temporary increases, ensuring that returning to 4 percent would be politically costly and structurally disruptive.

Joseph B.D. Arriola is a resident of Dededo and a senatorial candidate.

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