A second Cabinet official has agreed to continue discussions on Guam’s earned income tax credit.
Department of the Interior Secretary David Bernhardt said he “is more than willing to help figure out” whether the EITC paid by the government of Guam to migrants from the freely associated states should be a factor in Guam’s Compact impact reimbursements.
Bernhardt was responding to a request for assistance from Guam Del. Michael San Nicolas during a House Natural Resources Committee budget discussion with the Interior Department for fiscal year 2020.
Bernhardt said he couldn’t promise to poll Treasury Secretary Steven Mnuchin, but Bernhardt said he will work with the Department of Treasury.
“It seems like an anomaly that maybe just has not been thought of,” Bernhardt said, referring to the lack of federal reimbursement to GovGuam for the EITC. “I will promise we will work with you and work with Treasury. … That’s our commitment.
In April, during a Financial Services Committee discussion with the U.S. Treasury, Mnuchin acknowledged Guam’s "very technical tax issues.” He told San Nicolas to “follow up” with Treasury regarding EITC.
San Nicolas had reiterated the disparity in Guam’s EITC program with that of other U.S. jurisdictions – specifically Hawaii.
Using the Interior Department's Compact impact payments as a jumping off point for the discussion, he pointed out that Guam and Hawaii were reimbursed about $892 per person.
“However, there is one very distinct difference between Hawaii and Guam with respect to Compact migrant costs, and that is the earned income tax credit. The earned income tax credit in Hawaii is actually funded by the U.S. Treasury,” San Nicolas stated. “So any Compact migrant who qualifies for EITC in their income tax filing, that’s actually money that goes into Hawaii from the U.S. Treasury. On Guam, Guam has been absorbing the earned income tax credit liability since 2008.”
The federal EITC is a tax benefit designed to help low- to moderate-income working people.
The states are reimbursed by the federal government for the EITC payments they make. Guam and the other territories are not. There have been previous combined efforts to recover the cost of EITC. Last year, the Puerto Rico and Virgin Islands Equitable Rebuild Act introduced by Vermont Independent Bernie Sanders, proposed hurricane disaster relief funding for those two U.S. territories by eliminating the Medicaid cap, rebasing Medicare targets and reimbursing them for EITC payouts.
Generally, the average EITC amount received per tax filer was $2,488 during the 2017 tax year, according to the IRS.
The Office of Public Accountability has noted the growth of Guam’s EITC. EITC went from 11% of refunds in 2000, or $6.2 million, to 43% of refunds, or $56.8 million in 2011.
Of the roughly $57 million in EITC paid out in recent years, the wage earners who received those checks paid in less than $20 million, Lester Carlson, director of the Bureau of Budget and Management Research, has said.
It’s unclear how much of EITC is paid to citizens of freely associated states who qualify for the tax credit.
San Nicolas asked Bernhardt if he could help determine whether EITC is a part of the formula used to determine Compact impact reimbursements.
“And so the $892 provided per migrant for Guam and for Hawaii, I’m assuming is formulaically based as determined by the department. But if that formula (includes the) economic contribution of the migrant worker then the earned income tax credit liability of the migrant workers also needs to be factored in,” the Guam delegate stated. “And I don’t really think that this is something this government has really paid attention to.”