[Congressional Record (Bound Edition), Volume 149 (2003), Part 8]
[House]
[Pages 10542-10543]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    THE EFFECTS OF TAX CUTS ON GUAM

  The SPEAKER pro tempore (Mr. Issa). Pursuant to the order of the 
House of January 7, 2003, the gentlewoman from Guam (Ms. Bordallo) is 
recognized during morning hour debates for 5 minutes.
  Ms. BORDALLO. Mr. Speaker, I rise today to enlighten my colleagues on 
how the tax cut legislation will affect my district, the Territory of 
Guam. Because Guam follows the mirror tax code, tax changes enacted by 
Congress are mirrored by the Guam tax code, and the tax cuts being 
contemplated by Congress this week would have a substantial effect on 
our island's tax revenues.
  On Guam we face great challenges due to a recession that continues 
and a slowdown in visitors to our island. Allow me, Mr. Speaker, to 
present the Members with a picture of the current fiscal troubles 
encountered by the Government of Guam. The governor and the legislature 
are poised to enact a bill that will authorize the borrowing of in 
excess of $200 million from the bond market to deal with our deficit. 
We learned just today that Standard & Poor's recently downgraded its 
general credit rating for the Government of Guam from BB to B, 
considering Guam's $416 million of current outstanding debt. This 
places Guam's creditworthiness into a moderate to high-risk category. 
Thus, in addition to lacking revenues to meet the basic needs of our 
community, future generations will have to shoulder the burden of 
excessive bond deficits and high interest repayment rates.
  The House Committee on Government Reform, Democratic staff, recently 
prepared a special report which estimates the effect of the proposed 
tax cuts on Guam's Treasury. The committee estimates that the proposed 
tax cuts would cost $38 million for fiscal year 2003. While these funds 
theoretically provide Guam taxpayers with tax

[[Page 10543]]

relief, the report demonstrates that the average tax cut for the bottom 
56 percent of Guam taxpayers would be $199. The average tax cut for the 
top 2 percent of taxpayers on Guam would be $13,935. In fact, the top 2 
percent in the household income category would receive a 
disproportionate 21 percent of the total tax cut. While there may 
indeed be positive benefits to these tax cuts, Mr. Speaker, the loss of 
$38 million in general fund revenues, almost 10 percent of the fiscal 
year 2004 budget projection, is a serious issue that should concern us.
  While the bill that the House will consider on Friday has scaled back 
some of the tax cuts on dividends and capital gains, I strongly urge 
the Committee on the Budget and the Committee on Ways and Means to 
consider the effects of their proposals on the Territories that 
implement the mirror tax code such as Guam.
  We on Guam would like to see offsets for tax cuts that Congress 
imposes. This may not be possible, but there are other ways that the 
Federal Government can help us to mitigate the effects of tax cuts. For 
example, we would like to see an increase in Compact-impact 
reimbursement to Guam to cover the actual costs of Compact immigration. 
We would like to have the Medicaid costs fully reimbursed, not capped 
by statute. Finally, we would like to see Supplemental Security Income 
extended to the Territory of Guam.
  Any or all of these measures would help us to mitigate the effects of 
whichever tax cut Congress decides on. So my message today, Mr. 
Speaker, is that the Territories present unique situations that should 
be examined whenever Federal policy is considered and most importantly 
Federal tax policy.

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