The doctrine is on our side
Updated: Sep 7, 2021
There are people living here who have never paid a nickel’s worth of taxes to the IRS. If they die rich, their heirs won’t owe federal estate taxes on their Guam or foreign assets if they were born here.
They may work in one of the hotels on San Vitores Road, attracted to the island by an income tax loophole available nowhere else under the American flag.
San Vitores Road offers something not available in the states: duty-free shopping. States can’t levy what amounts to a tariff on imports. The Department of Revenue and Taxation can. It’s called the use tax.
When you land at our airport, your luggage isn’t inspected by agents of U.S. Customs and Border Protection. Our own Customs and Quarantine folks handle that chore.
Obviously, we, residents Guam, have advantages that people living in the states don’t have. How and why?
The answer is short: the Insular Cases, which usually means the Supreme Court case called Downes v. Bidwell, a case dealing with bananas and Puerto Rico at the turn of the last century.
Downes held that the constitution did not apply ex proprio vigore to the islands ceded to the United States.
Ex proprio vigore is a fancy phrase that means “of its own force.” Congress would decide what applies to the islands. Sounds like a raw deal, doesn’t it? But fortunately for us, Congress did right.
The Organic Act tipped its hat to most of the Bill of Rights which were made fully applicable in 1968.
The Organic Act evolved after 1950 down to today where we have nearly complete home rule. Lacking is our own constitution, which we’ve had the power to adopt since 1978, and our own tax law, which we have had the power to enact since 1986.
The Guam territorial income tax, or GTIC, is the “mirror image” of the Internal Revenue Code, with our governor having the same tax authority as the U.S. Secretary of the Treasury.
Unlike money paid to the IRS, local taxes pour into the Treasury of Guam along with taxes paid by service members stationed here pursuant to what’s called Section 30 of the Organic Act.
All these perks are the fruits of Downes v. Bidwell.
Last month I described how Vice Speaker Barnes and her “Barnes 8” — Sens. Frank Blas, Sabina Perez, Clynt Ridgell, Joe San Agustin, Amanda Shelton, José Terlaje and Mary Torres – undertook efforts to have Downes overruled. If they were to be successful it would be disastrous for the people of Guam.
Guam would then become an incorporated territory. The constitution fully applies to incorporated territories, which actually means all the burdens of statehood with none of the benefits.
Statehood for an island with 170,000 people and $2-billion in debt is a non-starter. Avoiding incorporation, with Downes remaining in place, is the sine qua non of self-determination.
On July 4, 1946, the United States relinquished sovereignty over the Philippines and the independent Republic of the Philippines was born. In 1984, the United States cut a deal with the Northern Marianas that would be impossible absent Downes, i.e., a malapportioned upper house, where little Rota has as many senators as Saipan and race-based land tenure rules.
The shiny object that apparently attracted the Barnes 8 was the shibboleth that the Insular Cases are racist. This is gaslighting at its best.
UOG history professor, Anne Perez Hattori, took the gaslighting national: “The United States flag is flying over these lands so some people said, well, doesn’t that mean that American laws apply? In 1901, the Insular Cases … (state that) the new territories were inhabited by ‘alien races and they may not be able to understand Anglo-Saxon laws, therefore, the Constitution doesn’t have to apply.’”
This false statement was uttered by Guam historian Anne Perez Hattori on HBO’s “Last Week Tonight with John Oliver.”
Unfortunately, Hattori’s fake history got legs and is the classic example of Robert Lind’s postulate: “It is easier to believe a lie that one has heard a thousand times, than to believe a fact that one has never heard before.”
The truth is that the Insular Cases are our best friends.
Bob Klitzkie is a former senator and Superior Court of Guam judge pro tem. He hosts a talk show, called “Tall Tales,” on KUSG-FM (93.3 FM) weekday afternoons from 4 to 6 p.m.