Guam senators spar over taxing military buildup contracts; Parkinson 6% proposal fails

The Committee of the Whole spent most of its morning on competing proposals to change how Guam taxes Department of Defense contracts tied to the island’s military buildup.

Senator Titegui proffered an amendment to remove a $10,000,000 threshold that currently limits which military buildup contracts are subject to the 5% business privilege tax (BPT). "I proffer an amendment to strengthen Guam's collection of Guam of the BPT revenue from the military contracts performed here on island," Titegui told colleagues, arguing revenue from the buildup should fund schools, roads and other infrastructure.

Senator Parkinson moved an amendment to the amendment to raise the collected rate from 5% to 6% for military buildup contracts, saying the buildup is a temporary, "captive" source of revenue that should be used to prepare Guam for long-term impacts. "If we raise our rates here, the military is not gonna start suddenly building somewhere else," Parkinson said, urging colleagues to "take advantage of this temporary measure."

Opponents warned the change risked harming Guam businesses that supply defense projects and said small local firms could be inadvertently affected. "The military buildup should be an opportunity for our local businesses, not a reason to single them out with higher tax rate," Senator Luhan said, listing bakeries, grocers, electricians and trucking firms that serve defense projects.

Senator Perez cited the public auditor’s work and figures during the debate, noting an estimate that Guam has "leaked" about $40,000,000 in BPT from military contractors due to exemptions and enforcement gaps. Perez said sample collections ranged from about 0.19% to 4.31% for some companies in the auditor’s review, below older statutory rates.

After floor debate the chair called for a show of hands and announced the Parkinson amendment failed. The broader effort to remove the $10 million threshold was later amended by its sponsor to apply to "military buildup" contracts specifically and then withdrawn when the body did not adopt the narrower language in time.

The debate illustrated a recurring tension on the floor: whether to capture one-time or temporary defense-related revenues to finance public needs now, or to avoid new or broader taxes that critics said could reduce local businesses’ competitiveness and ripple through the economy. The committee continued to consider additional amendments and housekeeping changes to the revenue chapter.

Next steps: several amendments were still pending as the Committee moved through the revenues chapter; the transcript records recorded failures and at least one technical amendment passing during the session.