Once more, with feeling
THE earned income tax credit or EITC program is an exceedingly good idea. Its primary goals are to assist low-income families while creating an incentive for citizens to join the workforce. It’s not perfect. (“Many taxpayers have found ways to circumvent the tax codes and walk away with huge refunds. The actions of these taxpayers have created massive losses due to overpayments of EITC. Numerous overpayments are due to fraudulent claims; paid preparers are responsible for about 50 percent of fraudulent claims related to the EITC.” That’s from a paper published by the Journal of Business & Economics Research in 2016.)
Still, compared to the usual heavy handed and ultimately counterproductive government mandates, the EITC is a more efficient way to help low-income workers and their families.
It also costs a lot, and someone has to pay for it. In the CNMI, the local program was scrapped by the Commonwealth government after the local economy cratered in 1998 in the wake of the Asian currency crisis. The CNMI government’s other obligations were (still are) immense, and to continue the EITC program would have meant steep tax hikes while the local economy was sinking. Raising or imposing new taxes would have been unthinkable if not boneheaded. Tourist arrivals had plummeted. (At one point, Korean arrivals were down 83%.) Businesses were shutting down. Work hours were reduced. Many workers in the private sector were filing labor complaints over unpaid wages and their employers’ failure to provide work. The CNMI government could no longer regularly remit its contributions to the Retirement Fund and had to implement austerity measures.
To help boost the economy, lawmakers passed a tax incentive measure for new investors, but there were very few takers, and several of those who received a qualifying certificate, which would have entitled them to tax breaks, had to give it up because their investment plan did not push through.
It is simply bad math to assume that without a (fruitless) tax incentive measure, the CNMI government, which had other mounting obligations, could have also continued paying for an EITC program that is now estimated to cost about $20 million a year. On Guam, which has a much larger economy, the local government was taken to court for its failure to pay the EITC.
The main and only reason why the CNMI has restored the EITC program is because this time it will be funded by the government (i.e., the federal taxpayers) of the United States which has the world’s largest and still most dynamic economy.
Today, the CNMI, which is basically on federal life support, still can’t afford an EITC program which is why it’s a good thing that the EITC bill was amended to safeguard the Commonwealth’s meager finances if, in the future, the feds would stop funding the program.
Instead of just congratulating themselves for spending other people’s money, local officials should also find ways to improve the CNMI economy so that the Commonwealth could once again pay for its own EITC program.
Political catnip
WE understand that conducting a House hearing on the governor’s public expenditures is catnip for his critics and political opponents, but we have to ask lawmakers once again:
• What about the $7 million for the Guma Hustisia and the real possibility that the judiciary will soon need millions of dollars more (and raise its fees, again) if its white elephant of a building is not maintained properly?
• And what about the government’s federal-court-mandated annual Settlement Fund payments and the 25% benefits for retirees?
• The annual medical referral funding shortage?
• The ability of the CNMI government to continue paying its so many obligations once the current level of federal assistance is over?
Any bill or recommendation about any of these truly pressing issues?
Anything?
Anyone?
