THE proposal to tax guest workers’ remittances is not new. It has been repeatedly discussed in the past. In 2001, then-gubernatorial candidate Juan N. Babauta mentioned in his campaign “Agenda” the amount that was remitted annually and the need to do something about it. He was governor for four years but I never heard him talk about it again. The annual figures, incidentally, are compiled by the CNMI government each year and are reported by the local media. (Full disclosure: I don’t remit money off-island.)
No one seriously considered imposing such a tax even when the local economy was still alive. As one of our online commentators noted, the proposal fails the nose test. It targets low-income workers performing jobs no one else will do, for wages no else will accept. These workers, moreover, are foreigners and have no say in the CNMI government. They are already paying income taxes. Taxing their wages, again, seems unfair.
If the government cannot directly impose taxes on remittances it can raise the tax rates of remittance centers, the largest of which is a locally owned franchise of a well-known U.S. company, Western Union. But remittance businesses, most of whose owners are U.S. citizens, may complain that they are being “singled out.” And even if this Legislature manages to impose such a tax or “fee,” remittance centers will just pass on the additional cost to the guest worker who remits $100-$200 per payday to his spouse and children back home. For guest workers, every dollar counts — indeed, it counts a lot. If they’re going to pay $10 or $12 instead of $8 for every time they remit money to their families, they may choose to send it through money orders instead. They can also open a bank account here, mail their ATM cards to their families who can then withdraw the money from ATM’s in the P.I. that are part of U.S.-based networks. These are just two obvious ways to avoid paying this bigoted tax. I’m sure that guest workers, especially the entrepreneurial minded among them, can think of other and better ways. The end result, of course, will be remittance centers with fewer customers and, naturally, a further decline in the taxes paid to this cash-starved government.
But desperation has truly set in on Capital Hill and lawmakers will be more desperate next year when they face an electorate demanding the restoration of the 80-hour government work period, the early release of scholarship checks, the quick approval of medical referrals and government jobs for those who just graduated from college. The income earned by nonvoting guest workers, however small, will be too tempting to ignore.
As Rep. Joe Palacios pointed out, “over $65 million” in 2010 was remitted by foreigners, and that’s a lot of money “not circulating in the economy.”
However, like most proposals of this hapless, hopeless Legislature, the logic behind the remittance tax is faulty, if nonexistent.
The wage received by a worker is his share of the revenue created by his labor and his employer’s enterprise. If a worker gets $5.05 an hour, that means someone can afford to pay him that amount, and that someone is getting more than that to be able to pay the other workers as well as the company’s vendors while also putting food on the employer’s table and allowing him to raise his family, too. In other words, a worker’s salary is only a small portion of the wealth created by the private sector. That wealth provides this government the money to pay its own employees and its own operations. This government does not produce revenue. It gets it from someone else — from businesses, which cannot exist without workers.
Palacios says $65 million is a lot of money. Sure is. But it belongs to the workers who earned it by performing useful tasks that resulted in the creation of value and revenue for their employers and this government.
How high, in any case, should the tax rate be to produce the revenue badly needed by this bloated and wasteful government? Even an additional $65 million a year is not enough. And what will the government do with the extra revenue? Based on its track record and considering that election year is almost upon us, it will be used, once again, on personnel, old and new. After all, the primary task of this government is to be the employment agency of voters. As I’ve repeatedly pointed out in the past, giving this government more revenue is like putting out fire with gasoline.
The question before the CNMI is not why foreigners would want to send money to their families, but how this government spends the tens of millions of dollars it collects through taxes and fees each year on top of the tens of millions more in handouts it gets from the feds.
Now for a recap.
The proposed tax on remittances is punitive and is unlikely to result in more revenue because those who are expected to pay for it can remit their hard-earned money through other means. It is, in short, another moronic proposal from Capital Hill. However, it also provides elected officials yet another scapegoat for their failed leadership. It distracts voters from the real problems facing their government and the need to accept obvious but painful solutions. The proposed tax is saying that it’s not the fault of your elected leaders who have been in charge all these years, and whose incompetence has brought the economy to its knees. No. It’s the fault of these foreigners — these whining, improved-status seeking, ungrateful outsiders from the Third World who dare send the paltry fruits of their labor to their families.
It’s always the fault of foreigners. Or the feds. Never your elected officials. Or you the voter.
Send feedback
