THE Senate Fiscal Affairs Committee is “cautiously” assessing the impact of two tax hike bills on the general public, Senate Vice President Donald Manglona said.
On Thursday, the committee, which he chairs, convened to discuss House Bill 23-7, which aims to ensure that all tobacco products are “properly taxed”; and H.B. 23-74, which would impose a 3% tax on construction activities.
The Senate committee invited Finance Secretary Tracy B. Norita and Revenue and Taxation Director Daniel Alvarez to the meeting and asked them to provide data on the tobacco tax collection as well as government revenue collected from construction projects.
In an interview before the meeting started, Manglona said the government, through these tax hike measures, is trying to increase its revenue to pay for public services that have been underfunded, “provided that these tax bills would not affect the general population more than it would affect infrastructure projects.”
He said of the tax hike measures that the House has transmitted to the Senate, H.B. 23-7 and H.B. 23-74 are the two bills his committee “is inclined to consider.”
“We are cautiously assessing the impact … of these two bills … on the general public,” Manglona said.
He said his committee may come up with a substitute version of H.B. 23-7 to tax vape juice and accessories instead. He said they are looking into possibility of creating a new tax category for vape juices and vape accessories.
Finance Secretary Norita said that from October 2023 to August 2024, the CNMI government collected $207,732 in vape-related taxes. She said roughly the same amount was collected for the same period of the previous fiscal year.
As for vape accessories, she said they are not part of their tax data because right now, vape accessories are subject only to excise tax.
Revenue and Taxation Director Alvarez, for his part, provided the committee historical data pertaining to construction-related taxes. From 2021 to 2023, he said the average amount of taxes collected from construction activities was $3.3 million a year. This, amount he said, does not include the construction activities funded by the U.S. Economic Development Administration and Community Development Block Grant-Disaster Recovery grants.
Norita said if H.B. 23-74 becomes law, the CNMI government is projected to collect $1.5 million in taxes from EDA-funded construction projects, and $2.2 million in taxes from CDBG-DR construction projects in FY 2025.
Finance does not have information on taxes collected from military construction projects, Alvarez said, so they cannot make a projection.
Manglona asked the Finance secretary if she is confident that their projected government revenue numbers can be collected in the next fiscal year.
She said, “I would say at this point that these are just high-level assumptions.” She said, “These forecasts were just pulled from the data that was requested two days ago.”
Norita said there are “so many factors” that can affect a construction project. “What would give us more confidence is the actual passage of the legislation and actual collections and then, from there, we would have a real basis to forecast,” she said.
Manglona said the committee will meet again on Sept. 5, 2024 to finalize the draft substitute bills.
Also present in the committee meeting on Thursday were Sens. Celina Babauta, Jude U. Hofschneider and Karl King-Nabors.
