GOVERNOR Arnold I. Palacios on Thursday said he doesn’t want to raise taxes, but “we really don’t have a choice” as “we are in dire straits.”
Lt. Gov. David M. Apatang said, “We don’t want to raise any tax. We never want to do that. But sometimes it is necessary to go that way. Even the U.S. Congress always talks about a tax hike. And I think we have not raised any taxes since we were both in the Legislature.”
Palacios said they decided to hold a press conference because “a lot of things that are being said are making the water a little bit murkier than…it should be.”
“I do not want to raise taxes,” the governor said, adding that “most of the people know that.”
But “knowing the predicament that we are in, we really don’t have a choice but to submit that proposal,” he said referring to his fiscal year 2024 budget submission which includes a “one-time” increase in the business gross revenue tax, which the administration hopes will generate $9.1 million.
“We need to get $9.1 million,” he added.
Palacios noted that the tax hike proposal is not “hidden or buried” in his FY 2024 budget submission.
“It is how it is — it is a proposal,” he added.
There are other options, the governor said. Like what Sen. Celina R. Babauta has mentioned, they could reduce spending, he added.
But he said when making a difficult choice, he doesn’t want to choose something that will “impact very vulnerable people.”
One of those difficult choices, he said, was to do away with the 25% benefit of the retirees that cost $13 million a year.
Under the settlement agreement approved by the federal court, the CNMI government is obligated to pay 75% only of the retirees’ pension.
“If we do that, we solve the problem,” Palacios said. “But do I want to do that and impact our retirees who are very dependent on that?”
Another option was to cut funding for medical referrals or the Health Network Program which needs between $8 million and $10 million a year, he added.
Since the proposed budget is now with the Legislature, Palacios said he is waiting for its members to start doing what they need to do and to figure out whether the proposed tax increase is something they can support. “And if not, what other proposals are out there that could generate $9.1 million or make the $9.1 million expenditure go away,” Palacios said.
He added that his administration is not playing games.
It is now up to the Legislature to take a look at the budget proposal, he reiterated. The legislators could either tweak it, amend it, or do away with it and come up with another proposal, he added.
“I just want to be clear about that,” he said.
A former House speaker, Senate president and lt. governor, Palacios said he has realized that “being in this seat subjects me to a lot more things than I’ve been used to before.”
“I am not really used to it, [but] I’m getting used to it,” he added. “It is a fact of life of being a governor. You are going to be criticized left and right, but at the end of the day, what is it that I need to do to keep things working and keep things afloat? Let me be very clear about one thing: We are in dire straits. I’ve been saying this since January.”
For his part, Apatang said they are asking the Legislature “to help us out” by approving a tax hike.
“We know where we’re at. You guys…know that we are struggling since the beginning,” he added.
“The governor and I, when we came in…we were surprised. We thought we’re just going to walk in here and find everything fine and dandy and all that. But no. We have not been sleeping well at night as we are trying to figure out how we are going to come out with funding for the next payroll. So it is not easy. We have to come out with some initiative and find a way. We don’t want to raise any tax. We never want to do that, but sometimes it is necessary to go that way,” Apatang said.
The administration’s tax hike proposal comes at a time when many businesses are still struggling amid the economic uncertainty and labor shortage that may worsen once the CW-1 touchback provision kicks in later this year.
Gov. Arnold I. Palacios, right, speaks to the members of the media, while Lt. Gov. David M. Apatang listens during a press conference at the governor’s office on Thursday.
