House unanimously OKs EITC bill

Members of the House of Representatives unanimously voted last Friday night to pass on first and final reading a bill that would repeal an existing CNMI law in order to make families eligible for the Earned Income Tax Credit as a form of financial relief.

Some House members clapped their hands when Speaker Edmund S. Villagomez (Ind-Saipan) announced that all 20 members voted for the passage of House Bill 22-19. The bill will now go to the Senate for action.

The bill’s author, Rep. Christina Marie E. Sablan (D-Saipan), thanked her colleagues for expediting action on her bill. Co-sponsored by several other lawmakers, H.B. 22-19 would restore the EITC for low-and moderate-income working families in the CNMI.

EITC is a refundable tax credit in the U.S. Internal Revenue Service Code that helps qualified low-to moderate-income working families and taxpayers get a tax break by allowing them to use the credit to reduce the taxes they owe, and in some cases, increase their tax refunds.

The legislation will repeal Title 4 Section 1709 of the Commonwealth Code, which currently provides that a taxpayer who is owed a tax refund due to “any excessive credit” must pay an additional tax to the Commonwealth that is equal to 100% of the refund.

During discussion on the legislation, Sablan said the CNMI law has imposed a 100% tax on the EITC for over 20 years now, primarily because it was deemed too costly. However, she said, in the IRS Code, the EITC is a refundable tax credit available primarily to low-income U.S. citizen working taxpayers and for lawful permanent residents. Citizens of the Freely Associated States who are living and working the U.S. are also eligible.

“And because we have adopted a tax code that mirrors the IRS code pursuant to the Covenant, the EITC would apply to eligible working taxpayers in the Northern Marianas,” she said.

Sablan credited the American Rescue Plan for resolving and doing away with the argument that the EITC is too costly. She said the EITC in the Marianas will be fully and permanently covered by federal funds.

“To ensure that the benefits of the EITC actually get to the pockets of our people who really need this help, we have to do our part and repeal the CNMI law that slaps a 100% tax on the EITC,” Sablan said.

Saying the main benefits of the EITC is that it stimulates the economy, Sablan said the Department of Finance estimates the total value of the EITC to be approximately $25 million.

“That’s money directly in the hands of people who are likely to spend it immediately to meet their basic needs and improve their lives,” she said.

Sablan said the money will be a tremendous help to families who have been hit hard by recent typhoon disasters and this global pandemic.

“The money is there. Our people need it. Now it’s up to us to repeal this tax, restore the EITC and get these funds to our people as soon and as quickly as possible,” she said.

Rep. Joseph Lee Pan Guerrero (R-Saipan) offered a floor amendment to put a sunset provision on the bill to ensure that the Commonwealth would not end up funding the EITC. That floor amendment was ultimately rejected.

Sablan said she does not support the amendment because the EITC enjoys very board bipartisan support nationwide. Sablan said a review of the literature shows how popular this one policy tool is for both Republican and Democrats.

She said the late President Ronald Reagan was one of the biggest champions of EITC and so are plenty of Democrats before and after him.

Even in the CNMI, Gov. Ralph DLG Torres, Delegate Gregorio Kilili S. Sablan (Ind-MP), and Rep. Angel A. Demapan (R-Saipan) are EITC advocates, Rep. Cristina Sablan said. To insert a sunset provision or any kind or provision “that presumes, speculates on the possibility, the very, very unlikely near-impossible possibility of changes by the U.S. Congress is insulting.”

Guerrero said he agreed with Sablan, but stated that this sunset provision is only intended to safeguard the CNMI in the event there are changes in the guard in Washington D.C. and they remove this provision.

“Is the CNMI ready to assume responsibility? Where are we going to get the funding once everything dries out? We can’t even bring the tourists, our only industry, back to the CNMI. How are we going to provide this money? Yes, it is good right now, I agree, but this is just a safeguard,” Guerrero said.

Ten voted “yes” to Guerrero’s amendment, while 10 voted against it. Villagomez voted “no” to break the tie.

Demapan also offered a floor amendment to include a subsection to ensure that only the EITC law is being considered and does not include other excess credits outside of the EITC.

Demapan said he would like to cast the vote to restore EITC only and not the unforeseen obligations of other excess credits.

Eleven voted “yes” to Demapan’s floor amendment.