Step up to the plate, for once
THE possible “solutions” to the CNMI government’s worsening financial crisis were discussed in spring last year by a federally funded fiscal summit just a few weeks after the local tourism industry was shut down by the Covid-19 pandemic. The recommendations included the merger of several government offices/agencies (elimination of jobs); a reduction in the size of the Legislature (more elimination of jobs); more furloughs (you get the picture); the end of a “Cadillac” medical referral program; relief from full payment of the government’s pension obligation; tax hikes and/or the imposition of new taxes; and other items that are as delightful as tooth extractions without anesthesia performed by a drunk non-dentist with grimy, clammy, shaking hands.
Remember: such major government policy decisions must be approved democratically by duly elected officials and/or voters. And there’s the rub. Do we really expect a majority of the electorate — any electorate — to willfully embrace measures that would financially ruin them?
But again, it is beyond dispute that the government doesn’t have enough money to pay all its obligations. And most elected officials and voters agree that the government should prioritize its spending, tighten its financial belt further, seek more federal aid, raise more revenue, improve and diversify the economy, etc., etc.
How exactly?
Let’s rephrase that question and address it to the elected officials who promised to “serve the people,” and make their lives better or at least not worse than what it is now:
Besides the inevitable legislative oversight hearings and heartfelt speeches and equally heartfelt reports and other political theatrics, what else can be done that actually involves doing (and not just talking about) something?
It’s still a bad idea
THE reasoning behind “sin” taxes is economically sound. When you increase the price of a commodity, the demand for it will likely go down. (That some intelligent, well-meaning people believe that this truism does not apply to government-mandated wage hikes is quite baffling.)
So if we increase and/or impose taxes on tobacco, alcohol and sugary beverages, their prices will surely go up, and we can expect, quite reasonably, that, henceforth, not a lot of these items will be sold — legally.
But then again, it is highly unlikely that a significant number of people would, all of a sudden, quit consuming “sinful” merchandise. It is also more than probable that enterprising individuals would find ways to provide consumers with less expensive tobacco, alcohol and sugary drinks. (Remember the unfortunate New Yorker who was arrested by the police for selling untaxed cigarettes?)
Sugar tax proponents claim that there is evidence that it “works.” But what about the evidence that shows it’s a bad idea? (“Sugar taxes are not very good at making people live healthier lives,” says Ben Ramanauskas who has degrees in law and economics, and is a researcher at the University of Oxford. “People,” he adds, “will still try to get their calorie kick some other way. For example, when a sugar tax was introduced in Mexico, it led to people eating more chocolate and sweets. Perhaps even more alarming for the public health lobby is the impact of a six-month experiment conducted by researchers at Cornell University in which some households in an American city faced a 10 percent tax on calorie-dense foods and drinks. The tax led to people buying more beer.”)
Sin-tax proponents are also hoping that their proposed tax hikes would provide CHCC with more funding. But as CNMI history shows, that depends on the central government’s overall financial condition. Since the economy cratered, has MVA received all of its legally mandated share of the hotel occupancy tax — whose rate was increased, incidentally, to provide MVA with more funding. What about PSS? Heck, let’s ask the former Retirement Fund officials. In its own white paper, CHCC noted that “FY 2017 and FY 2018 are the only years in…CHCC’s history when any of the tobacco control funds were received by…CHCC.” FYs 2017 and 2018 were economically good years for the CNMI.
If proposing an increase in sin-taxes is the best that “the best and the brightest” can offer, then we recommend that they stick to conducting more oversight hearings and holding more meetings and issuing more reports and giving more speeches.
