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Senate Passes Gross Receipts Tax Increase

In an acrimonious last-minute vote Thursday, the Senate approved increasing gross receipts tax from 4.5 percent to 5 percent, acquiescing to Gov. John deJongh Jr.’s request after turning it down once this year and twice last year.

The measure was attached as one of a string of unrelated amendments to a bill that otherwise simply added a single comma to V.I. code regarding the authority of V.I. magistrate judges.

Offered by Senate President Ronald Russell and cosponsored by all the senators who ultimately voted for it, the increase, if signed by deJongh, will take effect March 1 and remain in place "until such time as the corporate income taxes collected reaches the $185,000 level."

The same amendment also mandates the creation of a new seven-member volunteer commission to "study, analyze and develop a plan for the replacement of gross receipts taxes by new revenue measures to eliminate any undue burdens on taxpayers," and file a detailed plan for its replacement by the end of August.

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The governor would appoint two members to the commission, and the president of the Legislature would appoint the remaining five.

DeJongh has been asking for this increase in gross receipts taxes since his 2011 state of the territory address, when he began warning of a widening budget deficit. The administration also proposed eliminating nine paid government holidays, creating new cell phone fees, and other revenue increasing and cost cutting measures.

The Legislature had already implemented increased the gross receipts tax to 4.5 percent (not 5 percent) but declined to eliminate paid holidays. In June 2011, it passed a broad budget stabilization package that imposed an unpopular 8 percent government pay cut and offered cash incentives for senior employees to retire.

With a worsening economy and worse than projected tax receipts, the administration called a special session of the Legislature in late December 2011, demanding the tax increase and warning that without new revenues, the government would have to begin laying off employees. The Legislature voted down the tax increase on Dec. 24, amid increasing animosity between the two branches of government.

Layoffs began and several hundred pink slips later, the Senate approved another economic recovery act, authorizing $120 million in new borrowing to meet budgetary needs, but narrowly rejecting the tax increase.

DeJongh issued an acerbic response to the Legislature’s action in January, saying then that to “authorize a borrowing without providing the means of repayment is the same as offering to lend one’s car and then removing the tires."

"It appears we finally got the keys and tires to drive the car out of the garage," said Sen. Usie Richards, when the final vote was tallied and it was apparent the increase had passed.

The amendment was offered suddenly, at the very end of the session Thursday, after all other amendments had been voted upon. When opponents of the increase became aware of the nature of the amendment, Sens. Craig Barshinger, Alicia "Chucky" Hansen, Neville James, Terrence "Positive" Nelson and Nereida "Nellie" Rivera-O’Reilly left the floor in a failed effort to prevent a quorum.

Voting yes were Hansen, Richards, Sens. Carlton "Ital" Dowe, Sammuel Sanes, Patrick Sprauve and Celestino White. Voting no were Barshinger, Louis Hill, James, O’Reilly, Janet Millin-Young and Nelson. Sens. Shawn-Michael Malone and Alvin Williams were absent.

Russell said the amendment was “a measure necessary in light of Hovensa’s closure” needed “to keep government jobs.”

“This is the way to keep them," he said.

Nelson, who opposed the bill and is trying to get the Legislature to pass a bill to initiate a recall election against deJongh, said the measure would not help the territory’s budgetary outlook. "Now that they have snuck this through with an amendment, let the public wait and see what happens when this doesn’t pan out as expected," Nelson said.

The seven senators who voted for the increase also voted for the same increase in January. The measure failed last time it was brought before the Legislature because Malone and Williams – the two senators absent Thursday – voted against it.

Interestingly, Malone and Williams were the two senators who voted for increased borrowing, but voted against the tax increase in January. All the others either supported both or opposed both.

The same bill that served as a vehicle for this tax increase was used for an array of other measures too.

An amendment from Hill sets aside one roadside cleaning contract per year and one school repair contract per year for My Brother’s Workshop Inc. and for Ten Thousand Helpers of St. Croix, to make it easier for the two charities to offer paid, on-the-job training for young adults.

"Those agencies don’t have a lot of resources and don’t normally bid, but we are making it available to them so those young people trying to get their lives on track will have an opportunity to get skills training and also a chance to be employed," Hill said.

Also part of the final bill were amendments:
— from Barshinger, appropriating $56,000 from the St. John Capital Improvement Fund to the St. John Dial A Ride program;
— from Nelson, authorizing the Government Employee Retirement System to conduct a feasibility study on allowing private businesses to participate in the system;
— from Malone, clarifying language in the territory’s prohibition on selling tobacco to minors by removing reference to the seller’s subjective judgment about customers’ ages;
— from Hansen, setting up local requirements for residents to participate in the federal Lifeline program subsidizing the telephone bills of low-income customers;
— from Richards, clarifying that legal rights regarding written medical records also apply to electronic records, and eliminating duplicate language in the law;
— From James, reprogramming $37,000 to the V.I. Department of Education to match federal contributions to hire JROTC instructors;
— from White, reallocating $30,000 from unused 2008 Community Development Block Grant funding to Hearts In Service Association to add to its own funds, for the purchase of land in Anna’s Retreat for transitional housing;
— from Dowe, authorizing the V.I. Office of the Tax Assessor to hire recent government retirees and recently dismissed employees for a term not to exceed two years, only to fill critical positions as long as the retiree has the skills or experience needed to fill the critical position;
— from O’Reilly, allowing "at risk expectant mothers" to use handicapped parking spaces, and requiring evidence of a good faith effort at mediation before a court can enter any judgment of foreclosure.

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