Tax reform will impact Guam

What's being called the biggest tax overhaul the nation has seen in three decades is expected to help the pockets of island taxpayers, but for the government of Guam, it's time to brace for a possible financial "storm," as one elected official described it.

The tax reform that passed both the House and Senate awaited President Donald Trump's signature, who is expected to sign it soon.

Trump has laid out what the tax cuts would mean for the typical American household, according to whitehouse.gov. In his speech and in the final bill, Americans, including Guamanians, could see:

• A family of four, earning $75,000, benefit from about $2,000 in income tax cuts, slashing its tax bill in half

• Incomes rise by $4,000 across the board, as a result of tax cuts on U.S. businesses – although Democrats haven't been on board with this reform because they view the wealthy as standing to get the most benefit

• The standard deduction – the amount that individual taxpayers can shave off their taxable income – would nearly double to $12,000 if you're single, $18,000 if you're a head of household, and $24,000 for married couples filing a joint income tax return

• Those who are raising children up to age 17 can further lessen their tax bill, and maybe even get a tax refund, because the child tax credit would increase from $1,000 to $2,000 per child, per year

Once the tax reform is signed into law, taxpayers are expected to see their paychecks see a reduced deduction from the withholding tax payments, but situations could vary.

The full benefit of the tax cuts won't be seen until the income tax-filing season next year.

'Toughest fiscal decisions in a decade'

"While I am happy for the taxpayers that will benefit from this act, tax reform will directly impact our ability to pay every teacher, nurse, bus driver and social worker in the government of Guam," Speaker Benjamin Cruz said.

"Now that congressional action is clear, we must act to define the impacts of this massive reform and hope that Gov. (Eddie Calvo's) executive budget request is rational, responsible and ready for some of the toughest fiscal decisions in a decade."

Cruz is convening the government of Guam's Special Economic Service work group in the first week of January to quantify the impact of federal tax reform on government revenues. The work group, created by law, includes the Legislature's Ways and Means Committee chairperson or any equivalent role, as well as officials in charge of taxation, budget, economic development, tourism and the Labor Department's chief economist.

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'Arithmetic instead of politics'

"Without the political will to base our upcoming budget on arithmetic instead of politics, our children will ask why we saw the storm was coming and didn't bother to put up our typhoon shutters?" Cruz said.

Governor's spokeswoman Oyaol Ngirairikl said the administration is closely watching the tax reform developments, and will have preliminary budget-impact assessments as soon as next week.

Included in the new tax plan is a lowering of the corporate tax rate, from 35 percent to 21 percent, as well as new tax breaks for other businesses and individual tax rates at all levels.

Between $40 million and $70 million in the government of Guam's annual collection of corporate taxes alone could disappear with the proposed revisions to the federal tax code based on initial estimates, according to John Camacho, the director of the Department of Revenue and Taxation, in an earlier statement.

National Democrats were united in opposition to the tax legislation, calling it a giveaway to the wealthy that will widen the income gap between rich and poor, while over the next decade adding $1.5 trillion to the $20 trillion national debt, Reuters reported.

Up to $100M estimated loss

Taken in totality, a recent estimate of the impact discussed in recent meetings states GovGuam could potentially miss out on up to $100 million in tax collections because of the federal tax cuts, according to a discussion in a recent meeting of tax officials.

"The general thinking is that every (citizen) should get tax relief," said Lance Kamigaki, tax partner at accounting firm Ernst & Young on Guam, who summarized the recently passed overhaul for The Guam Daily Post.

"The thinking is the corporations get more money so they can invest, and increase the wages of the employees."

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