THE local Earned Income Tax Credit program proposed by House Bill 22-19 will be federally funded, Rep. Tina Sablan said Monday.
Tina Sablan
The author of the bill, Sablan said the program “will be fully and permanently funded by the federal government, thanks to the hard work and vision of [U.S.] Congressman Gregorio Kilili Camacho Sablan, our Democratic leadership in [the U.S.] Congress, and the Biden administration.”
She said the CNMI government now has to do its part and restore the EITC to the islands’ qualified working families and taxpayers.
In a separate e-mail interview, Congressman Kilili said under the $1.9 trillion American Rescue Plan Act of 2021 signed into law by President Biden, “the U.S. Treasury will permanently provide federal cover-over funding for the earned income tax credit program in the Marianas and the other insular jurisdictions.”
Rep. Tina Sablan said this is “an estimated $25 million that will go right into the pockets of working families who need it most and are likely to spend that money immediately and keep it circulating in the local economy.”
Prior to the passage of the American Rescue Plan Act, Finance Secretary David DLG Atalig informed the Legislature that without federal funding, the CNMI government could not fully fund the EITC program.
He said the Division of Revenue and Taxation initially estimated that EITC would cost the CNMI government more than $20 million a year.
H.B. 22-19 describes EITC as refundable tax credit that helps qualified low-to-moderate-income working families and taxpayers receive tax breaks by allowing them to use the credit to reduce the tax they owe and increase their tax refunds.
“It is a proven and effective tool to fight poverty and lift household incomes because it encourages labor force participation among low and middle income individuals, and families with children, and especially women with children, and puts money back into the hands of working taxpayers who need it most,” the bill stated.
The Finance secretary noted that the maximum EITC credit amounts have nearly doubled since the time the CNMI government concluded it was unable to fund EITC.
He said in 1998, for example, the maximum credit amounts were $341 without a qualifying child; $2,271 with one qualifying child; and $3,756 with more than one qualifying child.
For tax year 2020, maximum credit amounts were $538 without qualifying child; $3,584 with one qualifying child; $5,920 with two qualifying children; and $6,660 with three or more qualifying children.
First implemented by the administration of Gov. Froilan C. Tenorio (1994-1998) when the local economy was still booming, the EITC program was discontinued by his successor, Gov. Pedro P. Tenorio, in the wake of the Asian currency crisis, which resulted in a steep drop in CNMI government revenue and an economic downturn that lasted until 2014.
