Acevedo: Dacshle Supports 956; Daschle Aide: Daschle Not Wedded To 956... Senate Comm. Ok’s Votes In Congress For DC... House Passes P.R Quarter Without Acevedo

October 11, 2002
Copyright © 2002 THE PUERTO RICO HERALD. All Rights Reserved.


Puerto Rico’s Resident Commissioner in Washington, Anibal Acevedo Vila ("commonwealth party"/D), and Senate Majority Leader Tom Daschle’s (D) spokesman disagree on Daschle’s position on Governor Sila Calderon’s proposal that profits that companies based in the States earn from Puerto Rico and other territories be exempt from federal tax. The proposal would amend Section 956 and other sections of the Internal Revenue Code.

Acevedo said Wednesday that Daschle "totally supports" the proposal. When asked, Daschle’s spokesman said that the senator: wants to help Puerto Rico economically; believed the position of the governor of Puerto Rico should be seriously considered; was not wedded to Calderon’s proposal; and would work with Senate Finance Committee Chairman Max Baucus (D-MT) on the best way to help Puerto Rico.

The Daschle aide also said that the issue had been held up this year by differences on the best way to help Puerto Rico and probably would be considered next year if Democrats retain a majority in the Senate. Baucus has previously said that he did not support the proposal. ?

Acevedo’s claim echoed one that he and Calderon have made since they met with Daschle months ago. The Daschle aide’s correction of it was reminiscent of the statement made by Baucus and a similar one by the chairman of the House committee (Ways and Means), Bill Thomas (R-CA). Baucus made his statement when Calderon said after meeting with him that he supported her proposal. Thomas said that he did not favor another tax subsidy for subsidiaries in Puerto Rico of companies based in the States after Acevedo and Calderon’s chief economic adviser, Ramon Cantero Frau, suggested that Thomas would support the proposal after they and Calderon met with Thomas.

Daschle has said he would try to have the Senate pass a tax incentive for companies based in the States to operate in Puerto Rico, and sources say he raised Calderon’s proposal with Baucus. But the Senate Majority Leader has not pressed the issue since getting Baucus’ reaction and learning of the flaws of the proposal.

The issue of Daschle’s position was raised by columns written by an official of the administrations of President Bush’s father and Ronald Reagan. The columns appeared in the National Review, an influential public policy magazine, and the Washington Times, a newspaper that also appeals to Republicans.

The columns harshly criticized Daschle and the Calderon proposal -- for which it gave Daschle all the blame. They contrasted Daschle’s reported backing of the proposal with his opposition to other maneuvers by which companies based in the States avoid federal taxes by setting up island tax haven subsidiaries.

It suggested that Daschle was promoting the Calderon proposal because the drug manufacturers that would be the biggest beneficiaries have contributed $1 million to the Democratic Party campaign to retain a majority of the Senate. Daschle’s aide called the suggestion "ridiculous."

Although the columns did contain some factual errors, they explained some of the reasons that federal tax policy officials oppose the Calderon proposal — including that it is a thinly-veiled effort to recreate the tax benefits to companies that Internal Revenue Code Section 936 formerly provided. And the columns outlined the cost and abuses of Sec. 936 in addition to explaining the huge budgetary cost that the Sec. 956 amendment would have.

Until 1993, Sec. 936 exempted corporate income from Puerto Rico taxation. A law enacted that year limited the exemption so that it only applies to companies that have been benefiting from the exemption, and only exempts 40% of their income from taxation. Effective this year, the law also totally limited the dollar amount of the exemption. The law ends the exemption at the end of 1995.


The Senate Governmental Affairs Committee Wednesday approved a bill that would give the District of Columbia (DC) State-like representation in Congress.

The bill would require immediate elections of two senators and one representative. It also has implications for Puerto Rico’s lack of national government democracy issue.

Senate Majority Leader Daschle said that he would try to have the bill voted on during the remaining days of this Congress and next year as well, if needed, to pass it.

Votes for the foreseeable future are likely to be needed to pass it. Senate Minority Leader Trent Lott opposes the bill for the same reason that he has opposed statehood for DC and Puerto Rico: he is concerned that the areas would mostly elect Democrats to Congress. Bills can be blocked in the Senate unless they have the support of 60 of the 100 senators. Most Republicans in the Senate -- which has a one vote Democratic majority -- are expected to oppose DC voting rights.

The bill was passed by the committee chaired by Senator Joe Lieberman (D-CT), with all nine Democrats on the committee voting in favor and no Republicans present. The GOP absence was due to a boycott in attendance over an unrelated issue.

The bill is the latest effort by DC to get voting representation in Congress. The House defeated a DC statehood bill a few years ago. In 1978, Congress passed a constitutional amendment to give DC voting representation, but the measure fell far short of ratification by the required two-thirds of the States.

The federal government’s authority to grant a non-State jurisdiction voting representation in Congress by legislation is questionable. The Constitution limits voting representation to the States. DC obtained the right to elect presidential electors by constitutional amendment.

Lieberman championed the bill at the request of a longtime ally, DC Delegate to the House Eleanor Holmes Norton (D). Holmes Norton named the bill the "No Taxation Without Representation Act" partially to emphasize the distinction between DC and Puerto Rico. Residents of DC pay all federal taxes; residents of Puerto Rico pay few federal taxes.

In fact, Holmes Norton’s original version of the bill would have required Congress to either give DC voting congressional representation or exempt residents of DC from federal income taxes. Lieberman did not include that provision, but he did go along with language that makes as its first two points: (1) residents of DC "are the only Americans who pay federal income taxes but are denied voting representation;" and (2) residents of DC are "required to pay federal income taxes, unlike the Americans who live in the territories.

On the other hand, the bill also makes the point that a lack of "voting representation in our representative democracy is inconsistent with the founding principles of the Nation and the strongly held principles of the American people today" -- a primary argument of Puerto Rico statehood advocates. And Lieberman -- who has been a strong critic of Puerto Rico’s lack of national government democracy -- said he continues to be "astounded" that 600,000 U.S. citizens lack voting representation.

Additionally, the bill would increase the size of the House to accommodate the new representative from DC. House members from States in danger of losing seats in the House because their populations have declined relative to the rest of the country have been concerned about Puerto Rico statehood costing their States seats if the size of the House is not increased to accommodate representatives from Puerto Rico.

Civil rights groups -- especially African-American groups -- lobbied heavily for the legislation. A majority of DC’s residents are African-American. The support recalled national Hispanic-American support for Puerto Rico statehood.


The U.S. House of Representatives passed a bill this week that would have the U.S. Mint issue quarter dollar coins commemorating Puerto Rico and the other non-State jurisdictions of the United States -- the other U.S. territories and the District of Columbia (DC). The coins would be issued in 2009 after quarters commemorating each of the States are issued.

The House originally passed the bill two years ago during the final days of the 106th Congress. It died in that Congress when the Senate did not consider it. Its late passage by the House this year could lead to a similar fate in this 107th Congress.

Puerto Rico’s Acevedo Vila was missing from the debate on the bill. In fact, Acevedo’s office was silent on the issue for days afterwards, leading to speculation that they were unaware of the development.

Acevedo’s predecessor, Carlos Romero Barcelo (statehood party/D) was a driving force behind the legislation. Puerto Rico Senate statehood party leader and Democratic National Committee member Kenneth McClintock (D) was another early lobbyist for it. They became active on the issue when the House passed the State quarters program in 1999.

The delegates to the House from DC and the other territories have also been active on the issue since 1999. When the State quarters program was created, Romero and the Delegates convinced the chairman of the Financial Services Subcommittee involved, Representative Mike Castle (R-DE), that the territories and DC should be added to it.

Castle led the effort for the bill again this year with DC Delegate Holmes Norton. Also participating in the debate were the delegates from the territories of American Samoa and Guam.

Political status -- Puerto Rico’s fundamental issue -- was an issue in the legislation. DC and the territories were originally not included in the program because they are not States. The legislation to include them would exclude any that become a State (since it will automatically be included under the existing program) and exclude any territory that becomes a nation.

The status issue that was on House members’ minds was not Puerto Rico’s, however; it was DC’s statehood petition. One question some had was whether it would be seen as a step towards statehood. A concern others had was whether striking coins separately for DC and territories would be seen as a validation of their status — which does not provide full voting representation in the federal government. The consensus was, however, that the millions of citizens represented by DC and the territories should not be excluded from the program because of their jurisdictions’ status.

And bill floor manager Castle said, "I think that statehood will be, if anything, enhanced by this."

Status could also be an issue in the language and artwork on the quarter. The Secretary of the Treasury is to decide on it in consultation with the chief executive of each area. Would a Governor Calderon, for example, try to use it to promote her concept of "Commonwealth" the name of Puerto Rico’s local government that she (erroneously) regards as a non-territorial status? Such a situation could lead the secretary to exercise his authority to decide on the design unilaterally. Under the bill, he can also involve local artists and others in the design process.

The federal treasury is likely to be the biggest beneficiary of the bill. It costs four cents to make a quarter. Collectors and individuals are expected to keep, rather than spend, many of the commemorative quarters. Castle estimated that $1 billion in DC and territorial quarters — at a profit of 21 Cents each, would be bought and not used — a profit for the federal treasury as long as they are not used.


Leaders of the U.S. Senate and House of Representatives on the military construction bill for the fiscal year that began October 1 this week agreed to rescind an earlier appropriation of $30,700,000 for three improvements to the U.S. Army’s Fort Buchanan in San Juan, Puerto Rico. The bill is expected to be enacted into law soon.

The funds for the long-planned projects were not previously spent because Congress put a moratorium on construction at Fort Buchanan in 2000 in agreeing to let the residents of the island of Vieques, Puerto Rico determine whether the U.S. Navy training range on the island would be closed by May 1, 2003. The moratorium was put in place since closure of the range would free up working space at the Navy’s Roosevelt Roads, Puerto Rico station. It was reasons that this space could then be used to house Army operations conducted at Fort Buchanan.

The funds were originally appropriated in connection with the 1999 relocation of the Army’s Southern Command headquarters (USARSO) from Panama to Puerto Rico. The Army recently decided to again relocate the headquarters, this time to a fort in Texas. The improvements at Fort Buchanan were, therefore, determined not to be needed.

USARSO was relocated in Puerto Rico due to the efforts of some key Army officials, the White House staff of then President Clinton, and Governor Pedro Rossello (statehood party/D). At the time, Defense Department budget officials objected because of the cost of operating in Puerto Rico.

After the relocation, the anti-U.S. military actions of some Puerto Rican nationalists -- including Governor Sila Calderon ("commonwealth" party/no national party) exacerbated Puerto Rico quality of life concerns of Army officials. When it became clear that USARSO remaining in Puerto Rico was not a forgone conclusion, Calderon said the headquarters was not important to Puerto Rico and did not lobby to keep it.

In fact, the headquarters pumped in tens -- and possibly hundreds -- of millions of dollars a year into Puerto Rico’s economy. Learning of this, Calderon made a last-minute effort to keep the headquarters. Unfortunately, her lobbying effort began after the decision had already been made to move USARSO.

The "Washington Update" appears weekly.

Self-Determination Legislation | Puerto Rico Herald Home
Newsstand | Puerto Rico | U.S. Government | Archives
Search | Mailing List | Contact Us | Feedback