The Board of Education is proposing to impose a graduated increase on the withholding tax for those earning more than $50,000 per annum, with the funds collected to go directly to the Public School System’s yearly budget.
The idea is to increase the current withholding tax of 9% by one percentage point to 10% for those who make $50,000 per annum, and the tax will increase gradually as one’s income increases. This tax is imposed on everyone in the CNMI but the proposed increase is only for those earning $50,000 per annum or higher.
In an interview with BOE board member Phillip Mendiola-Long yesterday, he said that the BOE submitted five proposed bills to the Legislature but the most significant was the revenue bill that would increase the tax for the wealthy and generate additional funding for PSS.
“It is imperative that the Legislature look at these bills immediately. We don’t have much maneuvering ability when it comes to expenditure so even just the slightest change in the distribution from the general fund to the Public School System, we may have a problem with meeting our obligations and these bills are seeking to prevent that,” he said.
Mendiola-Long explained that the increase varies and depends on income per annum and will only apply to those making $50,000 and over.
He said the BOE felt there would be some room to derive some revenue from the wealthier members of the community, considering that the CNMI is among the lowest tax territories in the entire country.
“Hopefully…the Legislature will feel the same. If you’re at $50,000 right now, you cap out at 9%. What this bill does is, if you’re making $50,000, you’ll go up to 10%, $60,000 to $75,000 you’ll go up to 11%, and then it increases to $150,000. If you make $150,000 or more, you’ll pay 12% or 13% tax,” he said.
PSS had originally asked for a budget of $50 million for this fiscal year; it eventually got $37 million. That forced PSS to reduce personnel salary by 50% and prompted talks about the proposed tax hike.
“We have a $45-million personnel budget and we were only given $37 million to operate. There’s no more we can cut. We already cut the teachers; we cut everybody, so if the Legislature is asking us to cut more, that would have to translate to a reduction of force. We don’t want to do that. It hurts our kids, and it hurts the schools,” he said.
Mendiola-Long said the focus is to direct any tax increase to those with higher income and avoid hurting those who are struggling already.
“We’re hoping the Legislature sees that and that the more wealthy and blessed in our community are a little more giving and doesn’t give the Legislature a hard time for passing this piece of legislation,” he said.
The BOE also introduced a bill that would impose an additional tax on luxury items.
“We’ve also introduced a bill to add tax on luxury goods. So if you’re blessed enough to buy a Louis Vuitton purse, or if you’re blessed enough to buy a $12,000 necklace, we hope that you’d be willing to pay a little bit more of tax on top of that and that would be directed to the schools,” he said.