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HomeNewsArchivesGOVERNOR OKS REPEAL OF HIS OWN '2-CENTS' TAX

GOVERNOR OKS REPEAL OF HIS OWN '2-CENTS' TAX

Aug. 5, 2003 – Gov. Charles W. Turnbull didn't mention it in his transmittal letter to Senate President David Jones dated Friday, but he signed into law the Senate's repeal of the 2-cents-a-pound import tax that the Legislature passed a day after he had signed the levy into law.
The 3.5-page, single-spaced letter to Jones spelled out clearly everything else the governor signed, vetoed outright and line-item rejected. (See "Tax collection, infrastructure bills vetoed".) It made no reference to repeal of the tax.
The tax was the governor's own idea, contained in six bills he sent to the Senate in May as his fiscal recovery package — bills delivered late at night 36 hours before the special session he had called to consider them. (See "Outline of bills submitted to special session".)
Identified by the governor initially as an "environmental excise tax," the "two cents" tariff applied to everything imported into or produced in the territory for business purposes except for specified exemptions, notably rum, certain construction materials and agriculture supplies. Turnbull called for the tax to be earmarked to fund "immediate environmental changes" until such time as the proposed Waste Management Authority he has been seeking from his first term in office would become reality.
The Senate in the special session of June 18 approved the tax but renamed it a "user fee."
No public hearing was held on the measure. Only government officials testified concerning it. The reaction from the business community in the midst of an economic downturn was swift, unequivocal and some would say predictable: "Opponents say 'two cents' tax not worth it".) It was pointed out that the tax would impact heavily on the public for such a basic necessity as milk.
Less than three weeks after that, Jones said he was ready to repeal the measure. "In light of the public concerns raised, specifically by the business community, in terms of the cost that would be borne by the consumers," he said in early July, "we cannot support the tax as passed."
He said the key issue was the fact that the new "fee" would increase the cost of the goods.
Why this had not been taken into consideration by the lawmakers prior to approving the measure — or, for that matter, by the governor prior to proposing it — was not made clear. The business community, in expressing its opposition to the tax from the start, had not shied from pointing out the economic necessity of passing on such costs to consumers.
On July 14, Turnbull signed the tax, or fee, into law but said it needed modification, calling for the Senate to amend it by adding a number of additional exemptions. The next day the Senate voted instead to repeal the bill.
On Tuesday, a telephone call to the governor's Public Relations Office to ask about the tax repeal was answered by James O'Bryan Jr., the governor's former public information assistant and now St. Thomas-Water Island administrator. Asked where in the governor's letter of transmittal to the Senate president the tax measure was addressed, James O'Bryan requested that the Source hold the line while he checked. Several minutes later he came back on the line to say it was Section 6 of Bill No. 25-0042. Asked whether the letter mentioned the two-cents tax, O'Bryan replied "no."
An aide to Jones said he was not available for comment Tuesday.
Most administration tax proposals shot down
The governor's decision to reject his own two-cent tax further pares down the sources of new revenue he sought in the six-bill package he sent the Senate to address the fiscal crisis that he acknowledged on April 24 after months of insisting that the territory was experiencing nothing more than a "cash-flow problem." At last tally, the administration put the anticipated deficit by the end of Fiscal Year 2003 on Sept. 30 at $152 million.
The package included authorization for the government to float another $235 million in bonds, which the Senate approved on June 26.
It also called for an increase of 18.75 percent in the gross receipts tax, a tax of 20 cents a barrel on all crude and refined petroleum products brought into the territory, a $5-a-day surcharge on vehicle rentals, an increase in fuel taxes to 17 cents from 14 cents a gallon, extension of the highway user tax (or "road" tax) to taxis, a 2 percent surcharge on hotel rooms beyond the 8 percent room tax, a new 2 percent excise tax on food items, and changing the 2 percent stamp tax on the sale of real estate to a sliding scale tax ranging from 2 to 3.5 percent based on property price.
The Senate rejected all of these revenue proposals.
The governor's six-bill package also called for an increase in the road tax to 16 cents from 11 cents a pound, a doubling of license fees for banking institutions, a new tax on shipped cargo containers of $50 or $30, depending on size, every time they enter the territory, and a 4 percent tax on the value in excess of $500 on items imported for personal use.
The Senate approved these four revenue-enhancement measures, but changed the kick-in level for the personal imports tax to $1,000. It further authorized the government to increase fees by as much as $100 per year, in place of a 10 percent limit. But it also approved a waiving of new business license fees and a 50 percent reduction in license renewal fees on St. Croix.
Turnbull has so far rejected the strategy of reducing government costs by paring back what many believe to be a bloated government work force.
When all 15 senators called on him to roll back huge salary increases he granted to unclassified government employees last year as a condition of taking up the $235 million borrowing bill, the governor's concession was to impose a six-month reduction of 2 to 10 percent in those salaries in excess of $40,000 a year. The increases he had granted in 2002 averaged more than 24 percent for upper-level personnel and more than 20 percent for mid-level staff.

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