The House Ways & Means Committee has voted to repeal the 2% wage tax earmarked for the LBJ hospital altogether. The committee reached the decision after a hearing on the Senate bill to raise the excise tax on cigarettes by three cents and repeal 1% of the 2% wage tax for the hospital.
The repeal of the 2% tax has the support of the American Samoa Government’s (ASG) Treasurer Malemo Tausaga who was a witness at the hearing along with the Deputy Director of the Budget Office Aukuso Satia.
Currently, the tobacco taxes are divided among bond payment, the General Fund and the American Samoa Community College. The Treasurer provided totals of tax money raised for each of those earmarks in Fiscal Years 2020 and 2021 to-date.
He agreed with an observation by Rep. Larry Sanitoa that the government was tapping the same source for several different purposes. He also noted the challenges that Treasury faces with the different earmarks.
Rep. Sanitoa asked if it wasn’t better to have all revenues be channeled to the General Fund so that Treasury can disburse the revenue as legislated.
In the case of the LBJ Hospital, Rep. Vailiuama Steve Leasiolagi detailed the funding currently received by the hospital and emphasized that federal grants from sources such as Medicaid now require a much reduced local match. The hospital is also receiving COVID-19 grants. He said this should be enough to cover the 2% wage tax revenue if the tax is repealed.
It was also pointed out by Rep. Sanitoa that it doesn’t make sense that the government has taken initiatives to reduce the smoking habit and at the same time expects to raise revenues from tobacco products. He said if those initiatives are working there will be less people smoking and the revenues from cigarettes will not increase.
Sanitoa agreed with Rep. Vailiuama’s view that the LBJ Hospital is now in a much better financial position. He strongly urged the government to pay the subsidy that’s already approved in the budget for the hospital. He said that’s the law.
Treasurer Malemo revealed that in the last fiscal year ASG did not pay the mandated subsidy to the hospital. He fully supported the suggestion that the wage tax be repealed and for ASG to pay the subsidy for the hospital. Malemo said if revenues increase, the subsidy for the hospital can also be increased. He also favored channeling revenue into the General Fund from which Treasury can disburse funds as dictated by legislation.
Following the hearing which was chaired by Rep. Lavea Fatulegae’e Mauga, the committee agreed to amend the Senate bill which proposes the hiked cigarette tax by repealing the 2% wage tax for the hospital. The committee will also change the effective date for the bill. It is currently set to be effective immediately upon passage by the Fono and signing by the Governor. The revised effective date will be at the end of Fiscal Year 2021. This is because the 2% wage tax Is included in the current year budget of the hospital.
