NEWS: Preliminary numbers show additional $6M collected in BPT for April;
$30M spending cuts helps ensure $67M in General Fund shortfall is met
May 28, 2018
Hagåtña — About $6 million more was collected in BPT for this April compared to last year’s $16 million.
“This is the first month of the 1-percentage point increase,” said John Camacho, Department of Revenue and Taxation director. “If we maintain this for the remainder of the fiscal year then we should be OK.”
The new federal tax policy reduced the local government’s collections by about 18% for withholding and 40% for corporations.
The estimated $67 million in General Funds shortfall is a number that the Office of Finance and Budget calculated; it was agreed upon by the Public Auditor, Department of Administration, Rev & Tax, and Bureau of Budget Management & Research. To make up that shortfall the Legislature and Administration passed and signed into law, respectively, legislation that:
• Is estimated to raise $25 million with the 1-percentage point increase in BPT
• Requires a $30 million decrease in government expenditures – particularly from the General Fund, which is where the federal tax cuts would hit.
Camacho said based on SES projections and the actual collections, it is anticipated that this same level should hold for the remaining months of the fiscal year.
BBMR’s Lester Carlson said combination of the BPT increase and the $30 million cost-cutting measures help fill the $67 million shortfall.
Too soon for changes
The BPT will return to 4% in October. At which point a 2% sales tax, which local business leaders said would be better than a BPT increase, would go into effect to address the impact of the federal tax law on the upcoming fiscal year.
The new local law calls for a portion of that increase to directly fund the Guam Memorial Hospital and the Department of Education as a dedicated funding source. GMH has been underfunded by as much as $30 million a year for 4 decades. DOE officials have said the share intended for DOE would help fund badly needed improvements at schools.
“There have been discussions about removing the sales tax. Without addressing the shortfall anticipated for the next fiscal year or responding to the needs at the Guam Memorial Hospital or our public schools, removing that funding source would be irresponsible,” Governor Calvo stated.
Audit inaccurate: $21M in exemptions or tax credits by law
The Office of Public Accountability stated that $40 million in property taxes was uncollected, which is inaccurate.
More than half of the so-called uncollected tax — about $21 million — cannot be collected because taxpayers utilized exemptions and tax credits that were made available by law.
The remaining $18 million is either in probate, under installment agreements, or just hasn’t been paid by the resident for one reason or another but still collectible. The ongoing tax amnesty is part of an effort to collect on those taxes left unpaid. Additionally, Rev & Tax is working with other agencies to improve tax collections across the board.
The Department of Revenue and Taxation has been aggressive in tax collections, for example the local agency is auditing EITC at a rate exceeding the IRS’ effort.
