Under his first proposal, individuals earning $50,000 to $60,000 a year will pay a 10 percent withholding tax, while those earning $60,000 to $75,000 will pay an 11 percent withholding tax.
Those earning more will pay 1 percent more in withholding tax, but an individual getting $150,000 a year will pay an additional 3 percent.
“Right now, if you’re at $50,000 or above, you cap out at 9 percent. We are the lowest tax territory in the entire country. So we felt that there might be some room there to derive some revenue from the more wealthy or blessed in our community,” Mendiola-Long said in an interview.
“We will only ask them pay to 1 percent more and if your salary reaches the $150,000 level, an additional 3 percent more. This is an income adjustment tax and the revenue will be dedicated to PSS, and that can solve its personnel problem,” Mendiola-Long said.
With the economic downturn and the resulting reduction in government revenue collection, PSS can no longer afford the pay raises it implemented in fiscal year 2018.
“The focus is to direct any tax increase to the more blessed in our community and not to hurt those that are struggling,” Mendiola-Long added.
He said the proposed tax hike would raise an additional $1 million to $2 million a year for PSS.
His second proposal calls for the imposition of a value-added tax or VAT on luxury goods.
“If you are blessed enough to buy, for example, a Louis Vuitton purse or buy a necklace worth $12,000 or a Toyota Tundra truck or the latest vehicle model at $75,000, we hope that you would be willing to pay a little bit of tax on top of that,” Mendiola-Long said.
The VAT would provide additional revenue for PSS, he added.
He said he and BOE Chairwoman Janice Tenorio have been working with the Legislature in drafting the tax measures.
The Board of Education met on Tuesday to discuss the Public School System’s contingency plan for Covid-19. In photo are BOE Chairwoman Janice Marie A. Tenorio, secretary/treasurer MaryLou S. Ada, teacher representative Paul Miura, board member Andrew L. Orsini, board member Philip Mendiola-Long, Commissioner of Education Dr. Alfred B. Ada and other officials. BOE Vice Chairman Herman Atalig participated via teleconference. Contributed photo
For fiscal year 2020, PSS requested a $50 million appropriation of which more than $45 million would go to personnel and about $4 million for school operations.
Under the FY 2020 budget, however, PSS will receive $37.7 million only — $34.8 million for payroll and $2.9 million for operations.
Of the $2.9 million, PSS acting finance director Kimo Rosario said $800,000 is allotted for school operations; $1.2 million is the local match for federal grants; $600,000 for central office operations; $250,000 for fuel, repairs, and maintenance of the school bus fleet; and $1.2 million for utilities.
“Clearly, $2.9 million is insufficient to sustain operations,” Rosario said.
Mendiola-Long said PSS does not have much “maneuverability when it comes to expenditures.”
If there are cuts to be made, he added, they may have to come from payroll.
“And if there’s any slight change in the distribution [of allotments] from the general fund to PSS, we may have a problem with meeting our obligations. These [tax] bills are seeking to prevent that,” Mendiola-Long said, adding that the Legislature should consider the tax proposals immediately.
He said the situation is not an expenditure problem on the part of PSS — “It is a revenue issue.”
The Legislature could ask PSS to cut more, but PSS has nothing more to cut, he said. “It would translate into a reduction in force.”
He is hoping that the Legislature will support his proposals. “If the Legislature disagrees or the public is not willing to pay the extra tax, then the board has to make some very, very difficult decisions. But we hope that the wealthy [individuals] in the community will feel a little bit more [generous].”
Mendiola-Long said he is one of the individuals who would be taxed more under his tax proposals which, he added, have been submitted to lawmakers, including House Education Committee Chairman Roman Benavente, Rep. Tina Sablan, House Minority Leader Edwin Propst, Senate Vice President Jude Hofschneider, and Sen. Frank Cruz.
“We’re waiting for their action,” Mendiola-Long added.
