Acevedo At Odds With Democratic Candidates On Manufacturing Incentives… New Mexico Legislature Asks Feds To Enable Puerto Rican Status Choice…

February 20, 2004
Copyright © 2004 THE PUERTO RICO HERALD. All Rights Reserved.

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Acevedo At Odds With Democratic Candidates On Manufacturing Incentives

With former Vermont Governor Howard Dean ending his bid for the Democratic presidential nomination, Puerto Rico "commonwealth" party gubernatorial candidate Anibal Acevedo Vila said this week that he was in touch with the campaigns of Senators John Kerry (MA) and John Edwards (NC).

Acevedo, Puerto Rico’s Resident Commissioner, had backed Dean in return for the then-leading candidate not reiterating his support of statehood for the territory.

Kerry and Edwards, however, advocate economic policies that are inconsistent with Acevedo’s top priority as resident commissioner and that he has publicly disdained.

Acevedo previously said that members of his party will not support Kerry because the current front-runner for the nomination proposed extending the current federal tax credit that manufacturers based in the States can take for wages, capital investments, and local taxes in Puerto Rico. Internal Revenue Code IRC) Section 30A is due to expire at the end of 2005.

Ironically, Acevedo supported the same proposal when he ran for his current post in 2000. After the election, however, he joined Governor Sila Calderon ("commonwealth") in dropping the proposal and seeking an alternative, new tax proposal worked out with major drug and other profitable companies with operations in Puerto Rico. The alternative proposes 85-100% tax exemptions for profits that manufacturers in the States receive from Puerto Rico. The alternative would amend Sec. 956 and other sections of the federal tax code.

Kerry made his 30A proposal after he and other members of the Senate Finance Committee -- and most other federal tax policy authorities -- rejected the Calderon/Acevedo plan. Since Kerry’s proposal would help Puerto Rico economically, Acevedo’s main reason for disliking it probably was that it is popularly identified with the leading candidate for governor of Puerto Rico, Pedro Rossello (statehood/D).

Acevedo also dismissed another Kerry tax initiative to help Puerto Rico. That proposal would extend a nine percent tax cut on manufacturing income from the States to income from the territory as well. "That’s not what we want," Acevedo fumed when Kerry succeeded in winning committee approval of the amendment.

Edwards also supports this manufacturing tax cut.

Both Kerry and Edwards would also provide temporary tax credits for hiring factory workers -- measures that take the same general approach to encouraging manufacturing in underdeveloped and depressed communities that Kerry has proposed for Puerto Rico and that Acevedo has opposed.

  • Kerry would rebate payroll (Social Security and Medicare) taxes for two years for manufacturing investments in low-income areas.
  • Edwards would revive wage subsidy tax credits for ‘Economic Revitalization Zones.’

Edwards’ idea is similar to a proposal by some statehooders, such as resident commissioner candidate and Republican National Committeeman Luis Fortuno. Acevedo has also criticized proposals to apply Edwards-like tax benefits to Puerto Rico.

Edwards would also create a commission to identify corporate subsidies that should be eliminated. There continues to be a consensus among federal tax policymakers that the other current, expiring tax subsidy for companies based in the States with operations in Puerto Rico, IRC Sec. 936, should not be extended. Sec. 936 cuts the taxes on manufacturing income attributed to Puerto Rico 40%.

Many federal officials, however, have been willing to have Sec. 30A extended past 2005. It has not been extended because Calderon and Acevedo have opposed an extension.

Both Kerry and Edwards have also aimed fire at the federal tax code device that Calderon and Acevedo want to use to cut taxes on manufacturing income from Puerto Rico 85-100%. The device permits companies based in the States to set up special subsidiaries known as ‘controlled foreign corporations’ (CFCs) in foreign countries as well as U. S. territories that are not taxed. CFC profits are only taxed when ‘repatriated’ to the States

The two presidential candidates oppose the device’s substantial incentive for companies based in the States to locate manufacturing outside of the States.

New Mexico Legislature Asks Feds To Enable Puerto Rican Status Choice

The New Mexico State Legislature recently agreed to ask the Congress and the President to enact a law defining Puerto Rico’s political status options and authorizing a plebiscite in which Puerto Ricans could "make an informed decision" among the options.

The ‘joint memorial’ also asked the State’s delegation in the Congress "to actively promote" action on "this important national issue."

New Mexico’s Senate delegation is especially well-positioned to bring about action: Senator Pete Domenici (R) is Chairman of the Senate Energy and Natural Resources Committee, which has lead jurisdiction over territories issues in the Senate. Senator Jeff Bingaman (D) is the committee’s top ranking minority member.

Bingaman has been forthright regarding a past status proposal put forth by resident Commissioner Acevedo. To emphasize that the proposal was unrealistic and simply designed to attract votes, Bingaman termed it "the free beer and barbeque option." The territory’s options for a new -- and democratic -- status are statehood, independence, and becoming a sovereign nation in a ‘free association’ power-sharing arrangement with the U.S.

Two of New Mexico’s three members of the House of Representatives serve on the House committee of lead jurisdiction: Resources. They are Tom Udall (D) and Steve Pearce (R).

In addition to the ability of Domenici and Bingaman to promote the issue, the memorial is also especially significant because of the substantial Hispanic influence in the State. In fact, the memorial sponsored by Senate President Richard Romero recalls that New Mexico's "ascension to statehood is intertwined with" its "Hispanic heritage."

The statement counters Acevedo’s claim that Puerto Ricans are culturally incompatible with other U.S. citizens and, therefore, statehood should not be an option for the territory. (He does not explain how nearly four million people of Puerto Rican heritage exist in the current States.)

Acevedo and others in his party have enlisted anti-Hispanic conservative commentators and activists in the States to oppose a Puerto Rican status choice because Puerto Ricans would be likely to choose statehood in a choice among the territory’s real options.

New Mexico’s memorial also notes that the State, like Puerto Rico, was acquired by the United States "as a result of armed conflict" (rather than by action of the people of the territory). It notes that statehood came for New Mexico 84 years after acquisition. Puerto Rico has been a U.S. territory for 106 years.

This is the second time that New Mexico’s Legislature has sought federal action to enable Puerto Ricans to choose the territory’s future status. The first came in 1997.

The U.S. House of Representatives passed legislation in 1998 but Acevedo and Calderon succeeded in getting the U.S. Senate’s top two Republican leaders to block a vote on the bill. The bill had Republican as well as Democratic support in the Senate as it did in the House.

Legislation was enacted into law, however, in 2000. The legislation appropriated $2.5 million for Puerto Rico public education on and a voters’ choice among status proposals from the territory’s three status-based political parties as agreed to by the President of the U.S.

Puerto Rico’s governor, Sila Calderon ("commonwealth" party/no national party) blocked implementation of the legislation. She recognized that President Bush, like predecessor Bill Clinton, would reject her party’s status proposal.

New Mexico’s is not the only State legislature to petition for a federal law to enable Puerto Ricans to choose the territory’s status. California’s Legislature and Wisconsin’s General Assembly have passed resolutions similar to the New Mexico memorial.

Resolutions have also been passed by the Florida Senate and the Texas House of Representatives.

The "Washington Update" appears weekly.

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