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Candidates consider repeal of 2% wage tax at CoC candidate forum

A view of the audience at the recent Chamber of Commerce candidate forum.
fili@samoanews.com

Pago Pago, AMERICAN SAMOA — There has been much discussion in the Fono over the years whether or not to repeal the 2% wage tax, which is paid by all workers who earn an income, with revenue collected for the LBJ Medical Center — 50% for off island medical referral program and the balance for hospital operations.

There was even legislation — from both lawmakers and the Lolo Administration — introduced in the Fono in the past years to repeal the law, but the legislation never made it out of committee.  

The Administration’s proposal to repeal the wage tax submitted about a year-ago was included as part of major tax overhaul bill that included other new revenue measures, with which some lawmakers disagreed.

And whether or not to repeal this tax, was raised during a recent Chamber of Commerce gubernatorial form under the Taxation segment-issue.

Gubernatorial teams who participated in the form were:  I’aulualo Fa’afetai Talia for governor and Tapaau Dan Mageo Aga as lieutenant governor; Sen. Nuanuaolefeagaiga Saoluaga Nua for governor and Tapumanaia Galu Satele Jr., for lieutenant governor; and Lt. Gov. Lemanu Palepoi Sialega Mauga for governor and Talauega Eleasalo Va’alele Ale for lieutenant governor.

“It has been reported in the news that LBJ has not been receiving its portion of the 2% wage tax. If elected, would you repeal the 2% wage tax? Why or why not?” was the question posed to candidates starting with the I’aulualo and Tapaau team.

I’aulualo noted that the wage tax is earmarked by law to fund the hospital and “if anytime we take out that revenue stream, we have to find a [new] revenue stream to cover that. The hospital operation already depends on that money for operational cost.”

He claims that “right now the wage tax is not well implemented ever since” it became law and “it’s not well implemented by the government and we need to repeal it and perhaps maybe reconsider or restructure the statute [regarding] the wage tax.”

Moderator for this question asked a follow-up question — “What would you do differently, in making sure that this money goes to LBJ?”

“Right now, I know for a fact that, it was not fully implemented right, because I can tell you this, most of the people who are actually paying the 2% tax are the government employees because it’s easily deducted from their pay checks,” was I’aulualo’s response. “How it’s collected from the private sector employees — I don’t know.”

“We need to repeal it. Unfortunately it’s already earmarked for the hospital. But before we repeal it we need to have [new] revenue to cover that cost,” he said.

(ASG Treasury officials have testified in the past during Fono hearings that the only sure revenue collected from this tax is from ASG employees, as it’s taken out directly by the government.)

Responding for the Nua and Satele team, Nua said “we are committed to repealing the 2% wage tax [which] it is unfair because it doesn’t apply to all who earn an income here.”

“The 2% wage tax will be replaced by Medicaid funding. Our goal is to expand Medicaid services” and allow private and non-profit organizations to apply directly to US Centers for Medicaid and Medicare to be a provider, expanding medical service to the public, according to Nua.

For the Lemanu and Talauega team, Lemanu — who was a senator when the tax was passed by the Fono —  said that the set up of the wage tax from the beginning, “did work” when it was implemented at the time.

However, he said the wage tax has “always been an unfair taxation” because it only targets workers.

“We’ve been preaching sales tax” and repeal wage tax, he said noting that the hospital serves the entire community not just workers, who earn an income while a sales tax is paid by everyone.

Another avenue to improve healthcare service is further improvement to the Medicaid program, which is one of the well funded programs in American Samoa,” he said.

I’aulualo requested the moderator to allow his rebuttal which was granted. He said a majority of the hospital funding is by Medicaid and Medicare, as well as grants from the US Department of Interior.

“In order for us to repeal it (the 2% tax), the government has to come up with a funding source to cover that,” he said. “We cannot use Medicaid and Medicare money to cover that because those are cost reimbursements.”

Under Medicaid, ASG must come up with local revenues as matching funds for this federally funded program.