ST. CROIX — President Donald Trump’s proposal to fund tax cuts with tariffs would cost the Virgin Islands government $125 million annually if approved by Congress, according to the head of the Virgin Islands Bureau of Internal Revenue.
Trump on April 27 reiterated his previous statements that revenues from tariffs could replace individual income taxes before boarding Air Force One for his return from Pope Francis’ funeral in Rome, according to a CNN article published on April 28.
“It’ll take a little while before we do that, but we’re going to be cutting taxes, and it’s possible we’ll do a complete tax cut, because I think the tariffs will be enough to cut all of the income tax,” Trump said.
The president said his administration would begin by cutting federal taxes for people who make less than $200,000 a year.
Joel Lee, BIR director, estimated a $125 million annual reduction to the VI treasury if tax cuts were extended to people earning up to $200,000 in the territory.
“It would hurt us,” he said.
Although Trump is eyeing tariff revenues to offset what would be lost to the federal government in income taxes, the Virgin Islands would not receive any of those funds.
“Unfortunately, while we mirror the federal IRS tax system, our tariff system is different,” Lee said. “We are outside of the U.S. mainland, so we would not be a beneficiary to those tariff increases that he’s proposing on the federal level. So, we would definitely be in a pickle if he was to then actually put in place that tax cut for those who earn up to $200,000.”
If Trump’s proposal became reality, Lee said the VI government would have to find a new source of revenue to make up for the $125 million annual reduction. He said, however, he is not sure how the territory would do that.
“We’re not even, honestly, talking about that yet because there’s a lot of tax stuff that gets talked about,” he said.
Lee said there are “a ton of other tax provisions” introduced in Congress that do not get any attention. If he anticipated every tax option, he said he would forever be planning for various proposals that never come to fruition. He said he is taking the same position when it comes to Trump’s plan to cut taxes, noting approval by Congress is uncertain.
“It’s too premature right now,” he said. “I personally don’t think that’s going to actually happen, to be honest, because while he may be coming up with tariffs to pay it off, I think that would be a significant impact on the federal government’s revenue.”
