It looks like we're going to be stuck with the higher gross receipts tax of 5% for a while.
Gov. Lou Leon Guerrero on Monday said the tax increase – from the old rate of 4% – could be here "forever."
“I would like for it to stay, and I would like for it to stay forever," she said.
Her administration later clarified the tax hike will stick until “we start collecting more” taxes or “we have other new sources of revenue.”
“I have spoken to many business leaders,” the governor said, “and they are OK with the 5%.”
We don't think the majority of our island businesses are OK with a higher tax, but even if that's the case, the governor's statement is surprising.
When businesses get hit with tax increases, they simply pass on that extra cost to their customers. The governor, with her background as a bank executive, is well aware that businesses in general simply pass on the cost of higher taxes, ultimately, to consumers.
When the GRT increased, the price of consumer goods went up.
A trip to the grocery store now costs people more money for the same household necessities. A loaf of bread, a bag of rice, meat and vegetables are more expensive. When the government increased the tax on buildings each valued at $1 million or more, landlords simply passed that cost along to their tenants by increasing rent. So, yes, some businesses may be OK with a higher tax that they simply pass along.
But without a significant improvement in wages in the private sector and with the higher cost of food, transportation, rent and utilities, a lot more people with very little or no disposable income will be even further financially squeezed.
And, at some point, some of our neighbors, friends and family will face the decision to either try to stay afloat here, or to relocate. And if they can get better jobs, better housing, more affordable food and other necessities in other parts of the nation, they very well may leave.
This would leave the government of Guam with fewer people to tax. And fewer people with marketable job skills will stay on Guam.
The Legislature must consider this. Instead of merely following the governor's stance, senators have an obligation to help Guam residents – their constituents – continue to have a reason to stay.
Senators have an obligation to consider proposed tax rollbacks. They need to debate these proposals so the people will know where each senator stands.