Baucus Rebuffs Breaux’s Request For Calderon’s Tax Exemption… How The Navy Will End Training On Its Vieques Range By Next May

September 27, 2002
Copyright © 2002 THE PUERTO RICO HERALD. All Rights Reserved.


Puerto Rico Governor Sila Calderon’s proposed tax exemption for profits that companies based in the States receive from subsidiaries in the territory suffered another major setback this week. Senate Finance Committee Chairman Max Baucus (MT) rejected a request from a key senator who is on the committee, fellow Democrat John Breaux (LA), to add the proposal to a bill to provide tax relief to small businesses in the States.

Breaux is the lead Senate sponsor of Calderon’s proposal. A conservative, he is also a pivotal force on the committee. He often serves as critical bridge between Democrats and Republicans on Committee issues and leads compromise efforts that are essential in the almost evenly divided Senate. He gets along with Republicans so well that President Bush tried to enlist him for a Cabinet job.

Baucus’ refusal to agree to the amendment -- even on a one-year basis --was his fourth major rejection of the proposal. He first declined a public request by another fellow Democrat on the committee, Senator Robert Torricelli (NJ), to add the a one-year version of the Calderon proposal to another bill. He later declined a private request by another Democratic senator to have the proposal added. He also told reporters that he did not support the proposal after -- and because -- Calderon had told the news media that he did.

On the other hand, Baucus aides have suggested a willingness to consider an extension of one of the existing tax incentives for U.S. companies to manufacture in Puerto Rico: Internal Revenue Code Sec. 30A, which provides tax credits for wages, and local taxes paid in the islands and capital investments made there. The credit is currently limited to existing claimants and expires at the end of 2005. Calderon ("commonwealth party"/no national party) no longer supports it although she was elected in 2000 pledging to seek an extension.

Breaux is a longtime supporter of tax incentives for U.S. corporate activity in Puerto Rico. He has supported the extension of Sec. 30A at the request of former Puerto Rico Governor Pedro Rossello (statehood party/Democrat) and the other current incentive, Section 936. Section 936, somewhat like Calderon’s amendment to Section 956, exempts Puerto Rico income from taxes, but, like Section 30A is now limited to existing users and 2005.

Breaux has especially close ties to the drug and other health care products industry, which would be the main beneficiary of Calderon’s proposal.

The ties were established when a fellow Louisianan was the top lobbyist for the pharmaceutical industry. The senator is regarded as such a good friend of business on many issues that his most memorable quote — presumably in self-deprecating jest -- may be, "I can’t be bought . . . but I can be rented."

Breaux is also a strong supporter of the U.S. Navy and shipping interests. His ties to Calderon on the tax incentive issue date to telling her when she took office that he would support her request on behalf of the pharmaceutical companies if she eased up in her efforts to force an immediate end to Navy and Marine Corps training at a Navy range on the island of Vieques, Puerto Rico.

The Louisiana senator was linked to Calderon by her top Democratic lobbyist in Washington, Thomas Boggs, whose firm is paid about $1 million a year by the Calderon Administration. Boggs, son of two House of Representatives members from Louisiana who together held the seat for many decades, is a major support of Breaux’s.

Baucus did not reject all of Breaux’s requests for additions to the small business bill. In fact, he accepted most — indicating that his opposition is due to the nature of Calderon’s proposal rather than because of an unwillingness to add to the bill or an unwillingness to accept Breaux proposals. Similarly Baucus accepted others proposals from Torricelli and the other Democratic senator when they proposed adding Section 956 amendment language to previous tax bills.


Calderon’s top lobbyist in Washington, Republican Charles Black, is also lobbying on behalf of a company based in the States to prevent the Congress from penalizing firms that establish shell headquarters in other island tax havens such as Bermuda.

Black’s firm is paid $100,000 or so a month by the Calderon Administration. One of his primary assignments is to win support for Calderon’s amendment to exempt from taxation profits from Puerto Rico of companies from the States. He is at the same time, however, lobbying for Accenture, a spin-off from the financial scandal-plagued Arthur Andersen accounting firm against proposals intended to prevent companies from setting up shell headquarters in tax havens to avoid federal taxation.

There are a number of proposals in the Congress with this goal. Some would tax such companies anyway. Others that are getting even more consideration would deny federal contracts to the companies.


Deputy Navy Secretary H.T. Johnson is the latest Bush Administration official to reiterate the legal requirements for the Navy to replace its Vieques range. A letter from Johnson that Representative Bob Filner (D-CA) released this week reminded Filner of the requirements of a law enacted last year. It was sent in response to Filner’s request to President Bush that he issue an executive order to end Navy use of the range next May.

Johnson’s letter was virtually a carbon copy of the contents of a letter that Navy Secretary Gordon England’s White House liaison sent the president of the National Puerto Rican Coalition (NPRC) that Washington Update reported on last week. NPRC President Manny Mirabal had also written Bush seeking an executive order, as have some 30 members of the U.S. House of Representatives and a number of leaders of citizens of Puerto Rican origin in the States.

The letters to Bush are being sent at the request of Vieques activists. Manny are being solicited by Flavio Cumpiano, a Washington lawyer who is from Puerto Rico and has been an active member of the "commonwealth" party.

The responses note that the Defense Authorization Act enacted into law last year requires the Secretary of the Navy to certify that the Navy and the Marine Corps have an at least equal means of training before the Vieques range is closed and that the certification be made after the receipt of advice on the matter from the top officers of the Navy and the Marine Corps.

The Navy and the Marine Corps have long contended that there is no other location that they can access on the eastern side of the United States where they can practice combat amphibious landings using all of the tactics involved in such invasions-- target practice from the sea and the sky as well as amphibious landings. No one else has identified such a place either.

As Washington Update reported last week, it is, therefore, likely that England will have to certify one of two different types of training — or a combination of both -- than has been conducted in the past if he is to meet President Bush’s goal of ending training at Vieques by next May 1. One method would conduct various aspects of the invasions at different locations. The other would use computer simulation in place of actual practice.

One technological development that may be used is a device called a Shipboard Virtual Trainer. The portable unit superimposes a computer image of terrain and structures that can be used in areas that are not populated or environmentally sensitive, such as areas of open ocean. Weapons could be used on the area with computer monitors indicating the success of the target practice based on aerial photographs and sonar bouy soundings. being taken at the time.

The Navy will have three sets of the devices later this year. Tests are then to be conducted in the Gulf of Mexico. 10 more sets are planned to be purchased at a cost of $50,000 each

Weapons that are longer ranged than ship cannons, such as cruise missiles, will also obviate the need for Vieques. Deputy Secretary of Defense Paul Wolfowitz has noted that the missiles cannot be used on populated Vieques. Precision-guided bombs that are directed by satellites area already diminishing the need for the Vieques range.

They have the advantage of replacing many more bombs because of their accuracy.

The new technology will probably be combined with training at a number of ranges on the East Coast. This would enable the navy not to be dependent upon one location as at present. Also being considered is a permanent range off the coast South Carolina. This would be used for 5-inch deck gunfire practice, such as occurs at Vieques.

The "Washington Update" appears weekly.

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