Delegate Gregorio Kilili Camacho Sablan (Ind-MP) is calling on the Legislature to stop taxing Marianas families that are eligible for the Earned Income Tax Credit. Commonwealth Public Law 11-25 currently slaps a 100-percent tax on any of the credit that could be refunded Marianas taxpayers.
“The estimate is $16 million would be refunded to taxpayers each year, if the Legislature repealed this law,” Sablan said.
“With Commonwealth revenues reported to be at an all-time high, now is the time to put more money in the hands of our working families.”
The EITC is available to U.S. citizens or green card holders who have paid jobs. A family of four, for instance, with earned income below $50,597, qualifies for a credit up to $5,616.
The credit is used first to zero-out any tax the family owes. Then, the rest is supposed to be paid to the family as a refund. But Commonwealth Public Law 11-25 takes away all of the refund by subjecting it to the 100-percent tax.
In a letter to Senate President Arnold Palacios (R-Saipan) and House Speaker Rafael Demapan (R-Saipan) on Friday, Sablan raised questions about the legality of the 100-percent tax law. Section 601 of the Marianas Covenant of Political Union with the United States requires that the Marianas income tax system mirror the federal tax system. The Earned Income Tax Credit is part of the federal system.
Covenant Section 601 also says the federal tax system will apply in the Marianas as it applies in Guam. And a 2001 Guam Supreme Court ruling found that the Government of Guam, which also has the mirror tax system, must pay taxpayers the EITC in full.
Sablan said the legality of Public Law 11-25 is not the real issue, however.
“The question the Legislature should consider is whether the appropriate public policy today is to make the EITC fully effective in the Marianas. I believe the answer is yes.”
Sablan says because the Earned Income Tax Credit is only available to those who have jobs it is part of the overall strategy to increase the number of U.S. workers in the labor-force.
“Reinstatement of the Earned Income Tax Credit would do much to bring U.S. workers off the sidelines and into jobs in the Marianas and would tie in directly with the strategy behind my legislation, the Northern Mariana Islands U.S. Workforce Act, H.R. 4869.
“These workers would benefit individually; and the Marianas would reduce our economic dependence on foreign labor and lessen the uncertainties of being subject to federal immigration law,” Sablan wrote to the Legislative leaders.
“Most important,” Sablan added, “ending the tax on the Earned Income Tax Credit would lift household incomes and raise the standard of living for many of our families. (PR)