THE House majority bloc members have introduced H.B. 22-19, the earned income tax credit or EITC bill with a clunky and grandiloquent title, “End Income Crush for Working Families Act.” We notice, however, that the bill doesn’t tell us the whole story about the EITC program in the CNMI. There was no mention that it was implemented during the administration of Gov. Froilan “Lang” C. Tenorio (1994-1998) when the local economy had soared to stratospheric heights. Tourist arrivals were at their historic peak (over 700,000 in 1997; compared to, more or less, zero since last year). In those days, the garment industry was still on island; the government was collecting revenue as if a slot player who had just hit jackpot (one senator from Tinian who seldom attended sessions had over 30 staffers). In 1997, Governor Lang submitted a $262 million budget proposal (according to an online inflation calculator, worth about $430 million today), the largest in CNMI history. That budget included a $56 million (today, worth about $93 million) allotment for PSS.
But then the Asian currency crisis happened, and the resulting financial conflagration quickly reached the CNMI. When the new administration took over in Jan. 1998, the newly sworn in governor, Teno, announced a $35 million (worth about $56 million today) shortfall. In the summer of 1998, Governor Teno signed P.L. 11-25 “to protect the fiscal integrity of the Commonwealth government….” Among other things, the law reinstated the excess credit tax on the earned income credit because the CNMI “can no longer afford to pay” the EITC.
Reading the “legislative findings” of H.B. 22-19, however, one gets the impression that P.L. 11-25 was enacted by “meanies” in government to “unduly burden” the “low- and middle-income earners” of the CNMI.
It took the Teno administration two years and three installment payments to meet the government’s EITC obligations incurred in 1997. And in 1999, the CNMI economy, although battered, was not in a coma, and was still powered by two industries. Today, we have one industry left (tourism) and it has been shut down for close to a year now.
Arguing for the re-implementation of the EITC program is very much like preaching to the choir. (The Torres administration brought up the issue and the need for federal funding with the White House during the 902 talks in 2016.) Compared to a government-mandated wage hike, the EITC has much to recommend it. But in the CNMI’s case, especially amid this severe economic crisis, the House leadership should mention the funding source or sources for their proposed EITC program. How much would it cost? Will the feds pay for it? That will be great (for the CNMI). But for how long? Even before the Covid-19 pandemic, Guam, the most economically advanced jurisdiction in the region, had been struggling to pay its EITC recipients. Without federal funding, can the CNMI afford it? We were told that rough estimates based on the 2019 tax returns indicate an annual local EITC cost of $25 million. The current PSS budget is $24 million.
The public, in any case, needs to see more figures and more analysis. Again, thank God for a bicameral legislature and separation of powers — the taxpayers’ main defenses against legislation that is long on good intentions but could be short on good sense.
Here’s a better way: cut government spending
THE governor said the CNMI needs revenue-raising legislation. If he means that lawmakers should pass more mindless measures like the business-fee hike, then we say no. No mas. No more.
Elected officials should consider, for once, the current economic climate, and the unfortunate possibility that it may take time, perhaps another year, before the tourism industry and the business community can get back on their feet again. They are the primary targets of any quick-grab-their-money legislation. But why should they be further burdened by the government’s extravagant spending habits?
Now if the government can find ways to raise revenue without picking local taxpayers’ (almost empty) pockets, well and good. Otherwise, the government should cut its costs. How? To paraphrase what a wag once said: That question makes us feel like mosquitoes at a nudist colony. We don’t know where to start.