Saipan — Perhaps one of the main reasons why voter turnout remains high in many democracies is that not everyone has the time to compare any politician’s statements before and after an election. Or an elected official’s pronouncements at the start of his/her term, and after months or years in office.
In the Commonwealth of the Northern Mariana Islands — like in many other democracies — many candidates for office will promise improvements and reforms if not “better times” (which was the actual campaign slogan of the winning gubernatorial ticket in 2005). The inaugural speeches of the newly elected officials will be along the same optimistic, moving-forward, a-change-is-gonna-come lines.
Shortly after he was sworn in, the CNMI’s new governor, who styled himself as a “fiscal conservative,” assured the public that he didn’t want “to go out and raise taxes again and impose the penalty on the businesses and the people of the Commonwealth because of the misappropriation [and] misdeeds [of] government officials,” referring to the previous administration.
But since then, the new governor and/or his allies in the legislature have recommended a business gross revenue tax hike, an imported betel nut and lime tax, a construction tax, a beverage container tax, and a marriage license fee hike. There may be others in the pipeline.
What has changed? What else. Those who were “out” are now in power. They are now in charge of a government apparatus that exists primarily to reward voters, including and especially one’s supporters, and potential ones. In a word, democracy. Or as one of the new lawmakers has said with refreshing candor, “I think we all agree that we don’t want to lay off anybody.” The lawmaker meant “anybody in the government.” Government employees and retirees — and their families — comprise the CNMI’s largest voting bloc.
So these tax/fee hike measures make “sense,” politically. But, like most political “solutions,” they are likely to create new or worse problems.
In 2011, when the local economy was in a deep slump and the overspending CNMI government was desperate for additional revenue, lawmakers proposed several tax-hike measures that provoked the exasperated ire of the Saipan Chamber of Commerce. “Now is not the time to extract, through increased taxation, funding for government expenditures from businesses that are barely surviving,” the then-chamber president. He added that “increases in the cost of doing business in the CNMI would have a net negative effect on business activity, consumer pricing, actual revenue generated by the proposed increases, and jobs in the CNMI.”
This is not just “common sense”; it’s basic math. However, like water and oil, basic math doesn’t mix well with politics.
Twelve years later, the local economy is once again in a deep slump, and the overspending CNMI government is once again desperate for additional revenue. And once again, the preferred “solution” is a tax hike.
This time, the Hotel Association of the Northern Mariana Islands joined the chamber of commerce in writing letters to the governor and other top CNMI officials to explain, respectfully and patiently, why tax-hike measures in a bad economy is an insane idea: “Adding costs to businesses through increased tax bills constrains the already limited resources within the business to hire employees [thus] reducing Wage and Salary collections. These individuals who do not find employment or who have been furloughed do not have the resources to spend at other businesses to support secondary business activity compounding the impact on [business gross revenue tax] collections. These businesses, combined, have less means to import new goods and a smaller market to sell new goods, reducing Excise Tax collections. Collectively, these three tax sources alone represent 80 percent of the CNMI government's total general revenue collections.”
In an interview, a business executive said they are likely to “pass” the increased costs (higher taxes) to consumers. But higher prices are bad for business. Consumers don’t like them. “If the whole objective of this bill is to generate revenue [for the government], we feel it’s a misconception to think [that] businesses will make the same number of sales or more. It’s quite the opposite. As a matter of fact, we would make less, therefore the government will generate less revenue.” In a “worst case scenario,” if wholesalers make less money, they will have to reduce their work hours and/or reduce staff. Which, again, will mean less revenue for the government.
Now CNMI officials — like most of their counterparts around the world — are not mindless. Many of them are very smart indeed. They are perfectly aware of how math works — and the validity of the business sector’s concerns regarding tax/fee hike measures. But what is their choice as elected officials? Significantly reducing government costs will directly affect government employees — and their families. Voters. As a Western European politician once said, “We all know what should be done, it’s just that we don’t know how to get elected afterward.”
However, if they pass tax/fee hike measures now, CNMI officials could claim “higher” revenue projections, and (over)spend accordingly — never mind if actual collections would be much less.
To paraphrase H.L. Mencken, nobody ever went broke underestimating the voting public’s ability to learn from the past.
Zaldy Dandan is editor of the CNMI’s oldest newspaper, Marianas Variety. His fourth book, “If He Isn’t Insane Then He Should Be: Stories & Poems from Saipan,” is available on amazon.com/.