Mo' tax money, mo' tax problems

April 3, 2018

   Taxes. Nobody likes figuring them out and no one likes paying them. Yet, lucky us, we have some new ones to discuss! So I’d like to start off by acknowledging how boring the conversation about taxes can be. That is, extremely boring this side of discussing the proper conjugation of verbs. (Not to be confused with conjugal visits, which I assume are exciting.)

 

   About the only time we enjoy taxes is when they are reversed (i.e. cut) or when we get a tax refund. When kids talk about what they want to be when they grow up, they’d say “fireman,” “super-spy,” “rapper, and certainly never “tax accountant” or “tax collector.”

 

   When did we last hear a good song about taxes? Never. The Beatles’ “Taxman” isn’t a very flattering portrayal, and it wasn’t even that good of a song, sorry, Ringo. If you’re a biblical scholar, you’ll remember that St. Matthew was originally a tax collector before he was an Apostle. At least on Guam, our taxes don’t go to the Roman Empire or Uncle Sam.

 

  So here we are — again— with GovGuam in financial crisis, facing an estimated revenue shortfall of $67 million due to the new tax policies coming into effect this year. Obviously, this is a product of national politics and the mirroring of the Guam tax structure to the U.S. Internal Revenue Code.   

 

Gov. Eddie Calvo tried unsuccessfully to get a 50 percent increase in the business privilege tax from 4 percent to 6 percent. The strongarm tactics included a call for all senators who disagreed with the proposal to resign, an unfortunate breach of the principle of separation of powers.

 

Gov. Eddie Calvo tried unsuccessfully to get a 50 percent increase in the business privilege tax from 4 percent to 6 percent. The strongarm tactics included a call for all senators who disagreed with the proposal to resign, an unfortunate breach of the principle of separation of powers. It really didn’t work, but numbers don’t lie even if politicians do, and the deficit remains.

 

   So then Bill 248 passed, which cut the baby in half by increasing the BPT to 5 percent temporarily, but also more importantly, instituted a 2 percent sales tax on goods and services. And it’s permanent. Two percent may not sound like much, but, just the same, it’s a brand new tax levied on most of the things you buy and services you need. One exception is liquid fuel. (But not hot air, so I guess politicians and commentators will still be responsible for that extra 2 percent!)

 

    Now, sales tax is a consumption tax, which means the more you spend, the more tax you pay. But it is regressive. Lower income people spend more of their income on consumption. (Bored yet? I warned you.).

 

   One big thing that the senators and governor “forgot” was to add important exemptions to make the tax less regressive on lower income people. Commodities such as food, medicine and hygiene items. Whoops! The mainland states have been doing this for decades, and it works.

 

   So now we have several senators introducing new bills to rectify this. The other complicating factor is how to tax services and which services are included.  Do we have to pay the new tax for our plumbers and mechanics? What about house cleaning or getting a haircut?  It gets complicated, and that means more interpretations, more bureaucracy, and more tax professionals will be needed to figure this all out. How much will be left of that 2 percent after all those costs are taken into account? We will soon find out.

 

   If you watch a video of rapper Cardi B rant about her tax bill lately, you’ll see she comes off more like a profane Milton Friedman than a cool hiphop artist. But she has a point about transparency. Once a new tax is implemented, it never goes away. The government will find new ways to spend your money.

 

    Don’t be shocked if you hear a 4 or 6 percent proposal repeated in the future. Institutions rarely disempower themselves. One more thing. Don’t get too excited when you get a refund or let the government tell you it’s a gift. It means you overpaid, and they owe you your own money that was withheld. That’s not a favor to pay back, that’s their job.

 

Joseph Meyers is a resident of Tamuning. Send feedback to joejoeirish@hotmail.com

 

 

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