The Guam Legislature is currently considering a proposal to cut the Business Privilege Tax (BPT) by 1%. Unfortunately, if it passes, the benefits will be concentrated among a few wealthy business owners, while the costs will be borne by the working class.
To their credit, proponents of the BPT cut have avoided claiming that the savings will be passed on to consumers—a claim that is difficult to defend based on our past experience. Following the BPT cut of the early 2000s, there was no sign of slowing inflation, much less a lower cost of living. There would likely be little to no effect on the cost of living.
However, the BPT cut would directly damage GovGuam’s finances, turning modest surpluses into a structural deficit. The same outcome occurred in the early 2000s, when cutting the BPT led to unsustainable deficits, which were masked by successive bond issuances under the Camacho and Calvo administrations. The pressure mounted when the Trump tax cuts savaged Guam’s withholding tax collections, leading the Calvo Administration and the Guam Legislature to permanently increase the BPT from 4% to 5%.
As the economy recovered from this economic contraction by choice, the Leon Guerrero–Tenorio Administration was able to provide tax relief to small businesses. Roughly 90% of businesses now pay a reduced BPT rate of 3%, while the 5% rate applies only to the top 10% of businesses by revenue. A new proposal to cut the BPT now would simply divert $82 million from public purposes into the private bank accounts of the highest-income businesses and owners.
But who really pays this cost? Is it the government? The government is a collective institution tasked by society to perform essential functions. It educates our children, protects our communities from crime and disaster, safeguards public health, provides for the needy, and fulfills many other critical responsibilities. When government is cut, the harm doesn’t fall on the institution—it falls on the people who depend on it: working class families, students, and the manam’ko.
Depriving our government of this funding could result in job losses for up to 750 government workers—even before factoring in potential federal spending reductions or the impact of a proposed income tax cut aimed at high earners. While it is theoretically possible that some of those jobs could shift to the private sector, job growth is driven by demand, not by tax rates. If a business already has enough staff to meet demand, there is little reason to hire more simply because its profit margins have increased. And when public servants lose their jobs, the consequences ripple outward—to classrooms, clinics, streets, and homes.
And if there is no net job growth, where is the pressure for higher wages? Fewer public sector jobs mean weaker overall labor demand and greater labor supply, which reduces workers’ bargaining power and gives businesses less incentive to raise wages. Cutting the BPT will harm the working class while benefiting only a relatively small group of high-income businesses—those who least need another handout.
So, what is to be done? The first principle is: “When you’re in a hole, stop digging.” While much of our current revenue already supports vital services—like safer streets, competitive teacher salaries, and investments in public health—some portion of the $82 million at stake could be reinvested more strategically. We must prioritize education, health, and other high-impact initiatives that leverage the strength of our working class to make Guam more resilient and competitive for decades to come.
GuamMinimumWage.org 