Acting Finance Secretary Robert Schrack said while the intent of House Bill 16-250 is good, their analysis shows it will not help the revenue collection at all.
“Our analysis indicates this bill would have a substantial negative impact on revenues. Based on tax year 2008 data, WST and ET revenues would have been reduced by $11.2 million. Our benchmark for the effect of additional economic activity is that government revenues increase by about 10 percent of the new activity,” said Schrack on a letter to Rep. Ray N. Yumul, R-Saipan and the chairman of the House Ways and Means Committee.
The bill proposes to eliminate the tax on total yearly wages and earnings of $25,000 or less and change the tax rates on yearly totals in excess of $25,000 starting at six percent escalating to 10 percent on total yearly amounts in excess of $100,000.
Schrack said assuming that all of the reduced taxes were spent in the local economy and not remitted overseas, additional revenues of $1.2 million would have been realized for a net revenue reduction of $10 million.
“There would be a similar effect on the FY 2010 estimated revenues, depending on the implementation date of the bill,” he said.
Rep. Joseph Reyes, R-Saipan, sponsored H.B. 16-250, which remains pending in the House.
According to Reyes, although there will be revenue loss from lower wage earning individuals, those will be offset by the income tax collected from those covered in the higher income bracket.
“Additionally, the funds not paid in income taxes because of this proposal, would nevertheless be spent in the local economy and result in economic growth for the CNMI,” Reyes said in the findings of his bill.
