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Editorials 2019-August-09

If it moves…

THE politician who introduced the tourist-tax-hike bill said she would rather tax tourists than “our own people.” Of course. Tourists don’t vote in CNMI elections. But they can “vote with their feet” which is the main concern of the islands’ only industry, tourism.

HANMI said the CNMI is already the highest taxed destination in Asia-Pacific with a 15 percent hotel occupancy tax. Now 15 + 5 (the proposed increase) = 20. A tax rate that “will be the highest in the country.” Monthly tourist arrivals have declined since Dec. 2017, the markets remain “soft,” MVA is running out of money for off-island promotions, and the growing U.S.-China conflict may affect the CNMI’s second largest tourism market and major source of new investments.

So let’s “price ourselves out”?

Higher prices are likely to reduce demand especially if a customer, in this case a tourist, has other options. We know that. Consumers, households and businesses know that. But many politicians (and voters) seem to believe that arithmetic doesn’t apply to government measures especially if they “come from the heart.”

Not surprisingly, the tax-hike proponents have already counted their eggs even though they don’t even have the chickens yet. The additional revenue will supposedly fund worthwhile projects and essential agencies. But as Commonwealth history has repeatedly shown, whenever the government runs out of money, earmarked funds can and will be reprogrammed. Ask MVA.

This is a stickup

THE previous hotel-tax hike was implemented when tourist arrivals were on the rise. The primary goal was to fund MVA’s off-island promotions and destination-enhancement projects. But with the economy now mired in a slump, the CNMI government is scrambling for funds to pay its most pressing obligations — those that it cannot avoid paying because of legal and political reasons. These include the Settlement Fund, bonds, payroll, medical referrals.

So if a tourist-tax hike is a bad idea — it is right now — what are the other possible “solutions”?

New or higher taxes and fees imposed on other people or entities? Spending cuts?

This is what makes running a government in a constitutional democracy “hard”: legislative and/or policy proposals are subject to the approval of other elected officials who, in turn, are accountable to voters. It is likely that what you propose will be debated, opposed and rejected. If it is approved, it will probably be a watered-down version. Moreover, decisions made today can be amended or repealed tomorrow. But the biggest obstacle of them all is the fact that there are not a lot of voters in a free society who will support measures they know will hit them where it hurts — their wallets.

Meanwhile, expect to hear more politicians demanding the imposition of higher or more taxes on the hapless Saipan casino investor which everyone says is about to croak. So how can you get more money from a dying enterprise?

The economist Thomas Sowell says the “first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it.” But the “first lesson of politics is to disregard the first lesson of economics.”

But then again

THE hotel-tax hike proposal is such a bad idea that it may actually become law. The exact same thing can be said about the bill to increase the business fees collected by the Department of Commerce.

Commerce supposedly wants to “assist” businesses by expanding the department’s workforce and enhancing their record-keeping capabilities. All of which will be funded by taking more money from businesses.

This is, surely, a strange way to “help” someone. There is a better way. The government should simplify the business licensing process, cut red tape, get rid of superfluous regulations, uphold the rule of law then get out of the way.

But this approach has a fatal flaw: it doesn’t require more government employees or higher government fees.