Working families in the Marianas should not be forgotten—especially in this time of economic growth, when the Commonwealth government is spending money on lots of other priorities. That is why I recommended to the Legislature ending the local tax on the Earned Income Tax Credit, or EITC.
The Marianas is the only place in our nation that uses the Internal Revenue Code and does not give taxpayers the full benefit of the EITC. In all 50 states, the District of Columbia, Guam, and the U.S. Virgin Islands, the EITC puts extra money in the pockets of working families. And the tax credit—an estimated $16 million in the Marianas—stimulates the economy. Families spend their EITC money paying bills, improving their homes, and shopping at local businesses.
Who is eligible for the EITC
In 2017, a family of four with income below $50,597 was eligible for an Earned Income Tax Credit up to $5,616. The EITC is first used to pay any tax the family owes. The unused balance is then paid to them as a refund check.
Only U.S. citizens and lawful permanent residents qualify and they have to be employed. So, the additional EITC income can be part of the larger strategy to build a local workforce, just like the recent collaboration of Triple J and the Northern Marianas Trades Institute will do, and my own legislation, the Northern Mariana Islands U.S. Workforce Act.
The EITC should be available in full to Marianas taxpayers
Section 601 of the Covenant provides that the income tax laws of the U.S. shall apply in the Marianas, and the federal tax code includes the Earned Income Tax Credit.
But, in 1998, the Commonwealth Legislature imposed a 100-percent tax on the EITC refund, taking money away from families who live paycheck to -paycheck. The findings in CNMI Public Law 11-25 declared that “the Commonwealth government can no longer afford to pay this credit.”
The Marianas is not the only place that had trouble paying the EITC. In Guam, the government stopped paying the tax credit, too. But in Guam the Legislature and taxpayers took the administration to court. And they won.
Both the Guam Supreme Court and the U.S. District Court of Guam determined that the government of Guam must pay the EITC because—like the Marianas—Guam’s tax law mirrors the federal tax code.
The EITC is a local responsibility
Paying the EITC was a local responsibility in the Marianas until the Legislature decided it was too expensive. And it remains a local responsibility.
In the last Congress, however, I introduced legislation to provide federal funds to the territories to pay for the cost of the EITC. H.R. 4309 was a bipartisan bill, co-sponsored by the Republican delegate of American Samoa, and the Democratic delegates of Guam, the U.S. Virgin Islands, and Puerto Rico. It received the support of the Obama administration. Gov. Ralph DLG Torres and his Section 902 team also endorsed the proposal. But the cost is $10 billion. That is a hard sell, especially when Guam and the U.S. Virgin Islands are already paying the EITC with local funds.
Standing up for working families
I will keep working for that federal funding. In the meantime, I believe the Commonwealth Legislature should reconsider its own responsibility. Those who say we have limited resources only mean they want to spend the money on something else. When there is zero local gaming tax on a billion-dollar casino, a 100 percent local tax on working families looks like a misplaced priority. When the Legislature is finding the resources to raise pay for lawmakers, elected officials, and appointed Cabinet members, there should be enough to end the local tax on working families, too.
Senate President Arnold Palacios and Rep. Ed Propst have already said they are willing to consider how to get it done.
As our economy grows and government spending increases, I believe it is important to speak up for the many Marianas families who should be getting all of the Earned Income Tax Credit. I will continue to be a voice for those who are working hard to make sure their children have health care, food on the table, a good education, and all the necessities of life. (Gregorio Kilili C. Sablan, Special to the Saipan Tribune)
Gregorio Kilili C. Sablan (Ind-MP) is the delegate of the Commonwealth of the Marana Islands in the U.S. Congress.