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OFFICIALS TELL LWV FISCAL PICTURE IMPROVED

Aug. 11, 2001 – Three government financial officials said Saturday that initiatives taken by the Turnbull administration have resulted in a rosier fiscal picture for the Virgin Islands.
Ira Mills, director of the Office of Management and Budget, Louis Willis, director of the Bureau of Internal Revenue, and Nathan Simmonds, head of the Office of Fiscal and Economic Recovery Implementation, took turns at a meeting of the League of Women Voters of the V.I. in outlining progress made in restoring the V.I. to financial health.
The greatest improvement appears to have been made in the increase in personal income tax collection and payment of refunds.
Willis was quick to credit his staff with working overtime to get tax refunds paid within the 45 days required to avoid compound interest payments of 8 percent.
The government has saved $1.2 million over fiscal year 1999 and $1.7 million over fiscal year 1998 in interest payments, he said. In the six years prior to 2000, the bureau had paid more than $24 million in interest on late returns -– or an average of $4 million per year. In contrast, and calling the time from 1994 to 2000 "seven years of waste," Willis said that as of Aug. 8, the bureau has paid $452,553 in interest.
One stumbling block the BIR still faces is payment of the unfunded Earned Income Credit, which is required because the Virgin Islands mirrors the federal tax system. Payments of the Earned Income Credit were a whopping 33 percent of income tax refunds paid for fiscal year 2000 in the V.I. The payments for earned income have been as high as 39 percent of all refunds in 1997.
The Earned Income Credit is a supplemental payment made to single heads of household who earn less than $31,000 per year and who have a least one child in the home.
Willis, along with members of the league, agreed the high percentage doesn't bode well for the average income of Virgin Islanders, which Willis pegged at about $18,000 per year.
He said the V.I. doesn't have the big incomes that partially fund the Earned Income Credit in the states.
The EIC is funded on the mainland, in part, through Social Security taxes as well. Willis said American Samoa is the only other U.S. territory that pays the credit. He said his recommendation to the governor would be to follow in Guam's footsteps and simply not pay it. He said Guam can't afford it, so officials there don't pay it.
Willis also said the V.I. has $96 million outstanding from uncollected taxes, but thanks to a plan he has submitted to Gov. Charles W. Turnbull, he expects to collect those back taxes. Part of his plan, which involves hiring 15 new employees, is to have lower-level BIR personnel make telephone calls seeking to collect back taxes from individuals owing less than $6,000, thus freeing up the current collectors to go after the big fish.
"They will call them at work; they'll call them at home," he said.
The breakdown of back taxes shows 74 individuals or firms in the top tax bracket owing between $100,000 and $400,000 each, for a total owed in excess of $34 million, with 24,977 taxpayers at the bottom end owing up to $6,000 each for a total of $26 million.
When questioned about the recent repeal of the attrition law, Mills cited the BIR as an example of why it was important to be able to hire new personnel departmentally. "Mr. Willis needs additional employees for collections," Mills said.
Under further questioning about keeping government hiring in check, Mills pointed out that "attrition took 1,200 people out of government." He said at that rate "we couldn't keep going and maintain services."
"Watch us," he said, indicating the government was being very selective in its hiring practices.
When asked about President Bush's tax credits, Willis said they were "a political tool to make the president look good," or according to Bush, to stimulate the economy. Willis said between the timely tax refunds and the recently promulgated step increases, the V.I. economy was sufficiently stimulated. Citing the overtime being worked by his staff to get the refunds out, he said if he'd had to deal with the credits, the staff, which was already working overtime, would have been working "11 hours a day."
Willis said the credits will be rolled in with 2001 tax returns, although he didn't say specifically how. However, in the past, he has said, "We are going to pay it next year." Some interpreted that to mean the credits would either be deducted from 2001 tax liabilities or added to 2001 tax refunds.
Both Mills and Simmonds pointed to initiatives derived from the Five Year Operating and Strategic Financial Plan as being part of the solution. Simmonds said 60 initiatives have been or are being implemented.
The suggested Tourism Authority isn't one of them, Simmonds said in response to a question from the St. Croix Chamber of Commerce president, Carmelo Rivera.
"The governor would prefer a tourism council," Simmonds said.
Rivera also asked what the government was doing to stem the tide of rampant public corruption and fraud. Simmonds said that due to the efforts of the Fraud and Corruption Task Force, "You should be seeing prosecutions shortly."
But Rivera said he was more concerned about fraud prevention.
The league's general membership meeting was teleconferenced between the St. Thomas and St. Croix campuses of the University of the Virgin Islands. About three dozen people attended.

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