With the same goal of easing economic pressure on island businesses, Senator Telo Taitague and the Guam Chamber of Commerce have different ideas on how to do carry it out

Taitague’s proposed amendment to Bill 11 would keep the 5% business privilege tax on defense-related contractors, while reducing it to 4% for local businesses.

“We keep talking about giving a tax break to individuals on this island that really need it. I’m for that! But not for people who have not had those struggles, that are making hundreds of millions of dollars on these contracts,” said Sen. Taitague.

As the military buildup is projected to wind down within the next five to ten years, the senator says the time to protect local revenue is now.

And she stands firm on the claim that this isn’t meant to be a punishment on contractors.

“Nobody is punishing them. Nobody is increasing the 5% (BPT) to 6%. We’re not punishing them. They already pay 5%,” added Taitague. “They’ve made us have to work on our waste water system that is going to cost the Government of Guam $800M. Where are we going to get that funding?”

However, the Guam Chamber of Commerce’s Catherine Castro and Tae Oh argue the amendment might be in violation of the federal supremacy clause by treating contractors tied to federal projects differently.

“By law, you cannot tax the federal government, and so by taxing the contractor that does business with the federal government, if you single them out for a special type of tax, then it would be considered discriminatory,” said Castro.

“If there is a bill that’s passed, it goes to court, either it’s gonna stay in court for quite a long time, not only that, if it’s ruled unconstitutional, then we will be stuck in court for years, and we would probably have to start the process all over again,” added Tae Oh.

Taitague disagrees, pointing to prior tax exemptions for small businesses and a 2010 law aimed specifically at capturing revenue from defense contracts.

“If there’s a constitutional issue with regards to this, then we should have been cited years ago when we gave the exemption for taxes for certain groups of individuals, businesses that make below $250,000 or $500,000,” added Taitague.

Ultimately, the chamber says the amendment will send the wrong message to Washington and that living within their means could be the solution for any loss of revenue for GovGuam.

As lawmakers prepare for committee markup and floor debate, one central question remains: How does Guam balance tax relief with long-term sustainability?