Progressive regression

IT seems that all elected officials and candidates for office are “pro-business,” especially small businesses. (Incidentally, are they aware that most, if not almost all, big businesses started small? For example, Walt Disney Co. With assets of over $200 billion, it is one of the world’s largest media conglomerates. Its first studio was a small garage of Walt Disney’s uncle.)

In any case, let’s just say that politicians seeking office in an election year are all “pro-economy.”

And yet what have they done as elected officials? Amid an economic downturn and uncertainty, the administration and Legislature increased business fees. They then attempted to double the tax of “unpopular” business establishments (the remaining e-gaming facilities on island) without a public hearing and without considering the resulting layoffs, downsizing and a reduction in government revenue collection.

Now they’re about to pass a budget bill that would raise taxes on tobacco and sweetened beverages. Supposedly, raising the prices of these commodities would not result in a decline in sales. Right.

Four years ago in Seattle, the city imposed a tax on soda and other sugary drinks “designed to result in the improved health of Seattle residents.” Early this year, citing a peer-reviewed study, Brad Polumbo of the Foundation for Economic Education reported that “consumers responded to the tax by purchasing less soda — and purchasing more beer….”

According to Polumbo, “Seattle’s policy may have successfully burdened its residents with a regressive tax and pushed them away from their first choice drinks. But it’s not at all apparent that it actually ‘improved the health of Seattle residents.’ Indeed, alcohol consumption carries a wide range of negative health consequences. And calorie-rich beer can actually contribute to obesity, the very problem this tax was supposed to address.”

What about raising the tobacco tax?

Polumbo calls it another “highly regressive” tax that “would undoubtedly hurt poor and working-class Americans the most.” He noted that CDC itself has stated that “people living below the poverty level and people having lower levels of educational attainment have higher rates of cigarette smoking than the general population.” Moreover, he said, research shows that low-income people spend a higher percentage of their income on cigarettes.

Measures that would impose new burdens on businesses, big or small, and taxes that could result in less revenue not more while hurting low-income people: these are the likely results of the mindless “revenue-generating” proposals of the “pro-economy” administration and Legislature.

Here’s the actual problem

THE CNMI government’s last “good” year, financially speaking, was 2018, except for its final quarter which was when Yutu happened.

Before the super-typhoon thrashed Saipan and Tinian, the administration reported that for fiscal year 2019 (Oct. 1, 2018 to Sept. 30, 2019), projected revenues would amount to $258.1 million. Minus the $44 million for the Settlement Fund and millions of dollars more for the government’s other obligations, the administration said $171 million would be available for the operations of the CNMI government, including $4.5 million for DPL.

As for the FY 2023 budget bill now pending in the Senate, its identified budgetary resources amount to $150.4 million. Minus the $36 million for the Settlement Fund and about $10 million for other obligations, the total projected revenue available for appropriation is $109.37 million which includes $5.4 million for DPL.

Now let’s do the math. $171 million minus $109 million is $62 million. That’s the size of the financial hole that the CNMI government must plug because clearly there has been no significant reduction in the size of government since Yutu. But thanks mostly to tens of millions of federal dollars, the CNMI has new agencies, programs and services while politicians consider proposals to create additional agencies, programs and services.

(“Chump”) Change you can believe in.

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