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Gov. Lemanu signs tobacco tax legislation into law — 2% wage tax repealed after 13 years

Gov. Lemanu Peleti Palepoi Sialega Mauga and Lt. Gov. Talauega Eleasalo Ale
fili@samoanews.com

Pago Pago, AMERICAN SAMOA — Tobacco taxes will increase soon after Gov. Lemanu Peleti Palepoi Sialega Mauga signed into law legislation, which increase the excise tax by 3 cents, and the measure also repeals the 2% wage tax, which is paid by all wage earners in American Samoa.

The governor signed the Senate bill into law on Apr. 8th, according to his letter to Fono leaders on that same date, saying that pursuant to a provision of the constitution, he will deposit the signed bill with the Secretary of American Samoa — who is also the lieutenant governor.

Lemanu didn’t say anything else in his letter to Fono leaders about the bill, which according to a provision, is effective immediately upon passage by the Fono and approval of the governor. No immediate word from the government as to whether it will officially inform cigarette retails and importers of the new excise tax that is imposed at the port of entry.

Currently the tax is 33-cents per cigarette or cigar and for each 10 grams of smoking tobacco. 

The approved legislation will increase the tax from 33 cents to “36” cents per cigarette or cigar and for each 10 grams of smoking tobacco.

Original language of the bill states that all revenues collected on the 3 cents is earmarked for LBJ Medical Center operations, but the House amended the bill to reflect that all revenues go to the ASG Treasury for allocation. The Senate later agreed with the amendment.

Some stores had told Samoa News last month that the 3 cent hike will put the price of cigarette at between $15 to $16 a pack on Tutuila — where the price currently ranges between $9.75 to $10.95. And it will be much more for Manu’a smokers under the new tax.

For the 2% wage tax, which was earmarked for LBJ operations and its Off Island Medical Referral Program, it’s now repealed, leaving the hospital to depend on federal funds, the annual ASG subsidy and its own revenues collected for operations.

Under its FY 2021 budget, LBJ estimated $3 million revenue from the wage tax, according to information provided to the Fono during committee hearings.

During a House committee hearing on the bill, ASG Treasurer Malemo Tausaga supported repealing the wage tax.

Efforts over the years to repeal the wage tax had been unsuccessful, and it has been called by lawmakers an “unfair” tax, because only wage earners pay this tax.

BACKGROUND

American Samoa’s 2% wage tax came about after the U.S. government initiated a 2% holiday on both the employer and employee share of the payroll tax during the Great Recession of 2008.

ASG however, during the tax holiday continued to collect the 2% from employees and local workers for its own use. Consequently, wage earners did not see any of what in 2008 was considered a ‘stimulus’ for U.S. workers and businesses.

The extra strain on workers’ paychecks went unnoticed until the feds reinstated the payroll tax and American Samoa workers were required to pay an additional 2% for the federal share with ASG maintaining what became the 2% wage tax up until now.