Ads by Google Ads by Google

Senate bill: Hike in tobacco tax could mean a drop in the 2% wage tax

Senators are shown here during the swearing-in ceremony in Jan.
Senate introduces a 3¢ increase in tobacco excise tax

Pago Pago, AMERICAN SAMOA — The tobacco excise tax will increase by 3 cents — which will help fund LBJ Medical Center operations — if a Senate bill introduced yesterday is enacted into law. The bill also includes a separate provision, which seeks to reduce to 1% the current 2% wage tax, that is paid by all wage earners in the territory.

The bill’s preamble notes that with the COVID-19 pandemic spreading around the world, American Samoa have been “blessed” as it remains COVID-free. With border closure under former Gov. Lolo Matalasi Moliga’s administration, “we have been able to stave off the pandemic and keep our people safe.”

But despite this blessing, “we must not be complacent. We must always be cautious and be prepared for whatever ailments are sent our way.”

Further, “we must be vigilant in making sure our only hospital — LBJ Medical Center — has all that they need to keep us safe”.

“In order to do so, we must provide them financial aid so they may continue to upgrade their facilities,” the preamble states. “They are in constant need of doctors and nurses as well as medical equipment and supplies. They must maintain the hospital to provide all acute services for our people.”

According to the preamble, “raising the tobacco tax and earmarking the fund to help LBJ is not only crucial but essential if we are to safeguard ourselves.”

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

The Senate bill will increase the tax to “36” cents per cigarette or cigar and for each 10 grams of smoking tobacco and 3-cents is earmarked for LBJ operations.

For the current 2% wage tax, it will be reduced to “1%” — with 50% of revenues collected earmarked for operations of the hospital and the other 50% to support the Off-Island Medical Referral Program, which is overseen by the medical center, according to the bill.

Sen. Utu Sila Poasa, chairman of the Senate Budget and Appropriations Committee, has scheduled a hearing next week Tuesday on the proposed bill.

There have been calls by some lawmakers in the past years, as well as legislation introduced in the Fono to repeal the wage tax — which was enacted into law more than 8 years ago — because it’s an unfair tax where only wage earners pay it. But all those efforts have failed and the wage tax remains in place.