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Three House reps propose law to repeal 2% Wage Tax

If approved into law, employees will no longer be paying the 2% wage tax as of September 2014, according to a bill proposed by three Members of the House of Representatives, Larry Sanitoa, Taotasi Archie Soliai and Vailoata Eteuati Amituana’i.


The 2% wage tax was effective and commenced in tax year 2012 and revenue generated from this wage tax and the accumulated proceeds were meant to pay the $3million loan from the Workmen’s Compensation Account and afterwards 50% of accumulated proceeds were to be transferred to the LBJ operations, while the remaining 50% was also to go to the hospital in support the Off-Island Medical Referral Program.


In a statement issued by the three lawmakers, Sanitoa, Taotasi and Vailoata said that while they understand the need to secure long term funding to sustain our only medical facility in the territory, the 2% wage tax is extremely problematic.


“It is detrimental to our low income families, which are the most vulnerable sector of our community, and it will adversely impact our overall economy because of less disposable income available for purchase of goods; it’s very unfair to all wage earners.”


The lawmakers noted, “Aside from Honorable Governor Lolo’s explanation on why this tax is unfair to wage earners, the most obvious argument we should consider is, this tax is already hurting our economy and most importantly our people — families of five or more with only one income earner who is earning wages below the poverty level.”


They pointed out with the ongoing national debate on whether we should increase the federal minimum wage, there has been no reasonable dialogue or recent viable study on whether a minimum wage increase for American Samoa’s lowest wage earners will have a catastrophic impact on our local economy.


“In the absence of this study, eliminating the 2% will be beneficial for our people,” they wrote.


“The government is collecting around $3.5M on the 2% tax from wage earners and that in our humble opinion is a significantly HUGE amount our government is taking away from the disposable income of families in our territory.”


The lawmakers also pointed out they have received recent reports from LBJ showing signs of improvement in their collection and billing efforts.


“That said, we all know there is still the challenge of improving their internal control guidelines and policies of which we believe – if given the timeline to focus on fixing it – LBJ will certainly prove to be manageable with the help of additional collected revenues.”


They further stated that in the last House Public Health Committee hearing, LBJ executives and Board members were advised that LBJ is now receiving over $18M in local revenue —which does not include the 2% wage tax.


“If we calculate all these numbers, LBJ stands to receive an amount close to what their approved budget is for FY 2014 without the 2% Wage Tax.” The lawmakers note that given the recent financial reports, LBJ should be managing without the 2% Wage Tax. The sunset provision does not kick in until Sept. 30, and if the tax is repealed during this session, LBJ will have enough time to work on their FY 2015 budget.”


The statement makes a point to acknowledge that the intent for which the legislature approved the 2% wage tax is not being met.


“The ASG Treasury is using portions of the 2% wage tax revenue to fund other LBJ obligations that, by all means, were not included in the statute. This is not only contrary to the intent of the statute, but it is an injustice to LBJ and especially to the people of American Samoa. All the more reason it should be repealed.”


“In the interest and well being of the people… our people… it is our hope that our Honorable colleagues and Senators will take into serious consideration the burden and the impact [with which] this 2% wage tax has affected our people. We need to repeal the 2% Wage Tax.”


(Samoa News notes that a hearing has already been held on this wage tax in the Senate which will be reported in tomorrow’s edition)