With the introduction of President George W. Bush’s 10-year, $1.6 trillion tax cut package to Congress on Thursday, the V.I.’s delegate to Congress is beginning to assess the potential impact on the territory.
Delegate Donna Christian-Christensen said Thursday that she wrote to the V.I. Bureau of Internal Revenue in January requesting information on how large the cut to the territory will be and what income levels will be most affected. Christensen said that information will be important in determining what remedies can be applied as the Virgin Islands treasury faces the prospect of fewer dollars in light of the tax cut.
Congressional Democrats, who oppose the Bush plan, argue that a millionaire would get a $46,000 tax cut under the first year of the Bush plan. A middle-class wage-earner would get about $225. Democrats are proposing $750 billion to $900 billion in tax cuts targeted at the neediest.
Citizens for Tax Justice, a nonpartisan, nonprofit research and advocacy organization, questioned Bush’s claim that under the plan, the "average" family would receive a tax cut of $1,600.
According to CTJ, almost 90 percent of taxpayers would receive less than $1,600 in tax cuts if the Bush plan were fully implemented. Additionally, 27 percent of taxpayers would receive no tax cut at all under the Bush plan, CTJ claims.
The Bush plan would treat married couples more generously than other tax filers. The typical married couple filing jointly would receive an income tax cut of $1,028 under the Bush plan when it is fully in place in 2006, CTJ said. The typical single taxpayer would get only $249. In contrast, counting all the elements of the Bush tax program, the best-off 1 percent of all taxpayers would get an average annual tax cut of $46,000 (in 1999 dollars)– almost 43 percent of the total reduction.
Measured in dollars, Bush’s proposal would give its largest tax cuts to upper-income people. Measured in percentage terms, however, middle-class people would get the largest tax cuts.
If the plan were fully implemented, a family with three young children and an annual income of $55,000 would receive a tax decrease of $3,354.
A single person earning $120,000 would get a tax cut of $6,374 or 20.9 percent. The plan would also eliminate the federal estate tax.
Christensen and the Delegate to Congress from Guam, Robert Underwood, have written to Treasury Secretary Paul O'Neill urging that "special consideration be undertaken for our unique circumstances" as the tax cut moves through Congress.
"Due to our struggling economies and high unemployment rates, which are 15 percent for Guam and 11 percent for the Virgin Islands, it is important that federal policymakers understand the implications for any tax-cut proposal on the operations of our governments and impact to our communities," the two wrote. "Because our local tax codes 'mirror' the U.S. tax code, we are anticipating a decrease in local revenues for our territorial governments."
Christensen said that she is also working with the Turnbull administration on a proposal to have the federal government pay for the earned income tax credit, which will save the treasury $10 million to $15 million annually.
Republican lawmakers said they hope to have tax cuts signed into law by July 4.
