As tax bill nears, Kilili asks Torres for Marianas data

Sablan

Delegate Gregorio Kilili C. Sablan (Ind-MP) has asked Gov. Ralph DLG Torres for his help in analyzing the impact of tax legislation now being debated in Congress.

In a letter to Torres last week, Sablan requested data on the number of Marianas tax filers using 10 different tax deductions or credits that are proposed to be cut. He also asked for the total dollar value of each of the deductions or credits.

The Republican majority in the U.S. House of Representatives has already made public its bill, H.R. 1, the Tax Cuts and Jobs Act. Republicans in the Senate are expected to release their legislation soon. President Donald J. Trump has set a deadline of this year for passage of a tax bill.

“As a mirror tax jurisdiction, any changes to the personal income tax provisions of the Internal Revenue Code applies to the Marianas and to taxpayers in the Marianas,” Sablan said. “I need to know exactly which of the proposed changes hurt Marianas taxpayers, which do not, and what the total impact will be, if H.R. 1 is enacted.”

Among the deductions that are on the chopping block are the deduction for teachers that allows them to reduce their taxable income by up to $250 for professional training or supplies purchased for the classroom and the deduction for student loan interest that helps reduce the cost of higher education.

“I am also concerned about the loss of the tax credit for the cost of dependent care assistance,” Sablan said. “Right now, families that pay for day care for their children, so parents can go to work, and families caring for aging parents can deduct some of those expenses from their taxes. The House tax bill takes that credit away.”

Another deduction taxpayers can take to reduce taxable income is the moving expense deduction.

“Being able to deduct moving expenses is an important incentive when we try to convince people to return home to the Marianas to work,” Sablan explained. “Loss of that deduction could undercut our effort to bring more U.S. workers into our labor force.”

Sablan said he is also concerned about the loss of the 10 percent tax bracket as proposed in the Republican bill.

“We have many low-income families in the Marianas. Right now, a married couple earning less than $19,050 pays 10 percent on their 1040CM. Under the Republican plan they will pay 12 percent.

“This is sometimes justified by changes in the standard deduction that lowers taxable income. The standard deduction is being raised from $12,700 for a couple to $24,000.

“Unfortunately, at the same time, the personal exemption, which also reduces taxable income, is being taken away.

“So, a family of four with a current standard deduction and four exemptions worth $28,900 would be left with only that $24,000 to deduct from their taxable income. And instead of a 10 percent tax on the net income they could be charged 12 percent.”

H.R. 1 also takes away the additional personal exemption for seniors, worth $1,550 for single filers and $2,500 for married couples.

Lower revenue
In his letter to Torres, Sablan said he was concerned not only with the impact of the tax bill on individuals and families, but also with the effect on the Commonwealth’s tax revenues. Congress’s Joint Committee on Taxation has estimated that H.R. 1 will reduce federal revenues by about $1.5 trillion over a 10-year period. Because the Marianas mirrors the federal tax system, the Commonwealth could also expect some decrease in revenue.

Torres, along with other insular area governors, wrote to the chairmen and ranking members of the House and Senate tax committees in October, asking that they take into consideration the potentially negative impacts of reform legislation on island jurisdictions.

Other members of Congress can assess the impact of the tax bill on their states and districts using data from the U.S. Treasury. But, because the Commonwealth Division of Revenue and Taxation, not the U.S. Internal Revenue Service, collects taxes in the Marianas, only the Commonwealth has the information needed to know how much the bill now being debated in Congress could affect Marianas taxpayers. (PR)