Acevedo: Only Puerto Ricans Out Of PR Should Vote for President… Redeployment Of Troops Could Aid Base In Puerto Rico… Army Acts To Avert Calderon Diversion Of Culebra Clean-up… Prats Misleads In Blaming Fortuno, Rossello For End Of 936 Tax Exemption

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

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Acevedo: Only Puerto Ricans Out Of PR Should Vote for President

The "commonwealth" party’s gubernatorial candidate, Anibal Acevedo Vila, recently underscored his view that the U.S. citizens of Puerto Rico are the only Puerto Ricans who should not vote to elect the president and vice president of the United States. He did it by refusing to co-sponsor an amendment to the U.S. Constitution in the Congress to give citizens in the territory the franchise.

The amendment was sponsored in the U.S. House of Representatives late last month by the delegate from the U.S. territory adjacent to Puerto Rico, the U.S. Virgin Islands. Donna Christensen’s joint resolution was co-sponsored by the delegates from the other two U.S. territories represented in the House, Madeleine Bordallo of Guam and Eni Faleomavaega of American Samoa.

Acevedo also had the opportunity to co-sponsor the legislation as Puerto Rico’s resident commissioner.

The amendment would extend the presidential franchise to the U.S. citizens of all five populated U.S. territories, including the Northern Mariana Islands as well as American Samoa, Guam, Puerto Rico, and the Virgin Islands.

Acevedo has evidenced his support of people of Puerto Rican origin in the States voting for Puerto Rico’s national government executives by encouraging the $12 million plus campaign of his mentor, Puerto Rico Governor Sila Calderon (no national party), to register people of Puerto Rican heritage among others in the States to vote in the States.

Acevedo’s opposition to the U.S. citizens of Puerto Rico voting to elect Puerto Rico’s president and vice president does not extend to islanders voting to nominate candidates for the two offices. He was a delegate to both the 2000 and 2004 Democratic National Conventions that nominated that party’s candidates (although he failed to attend this year’s Convention).

To become effective, the amendment would have to be approved by each house of the Congress by a two-thirds majority vote and the legislatures of three-fourths of the States within seven years.

A 1960 amendment gave the District of Columbia, another non-State jurisdiction, equal voting representation of the election of the president and the vice president. Puerto Rico’s "commonwealth" party governor at the time declined to have the territory included. A decade later, an advisory group appointed by President Nixon supported the extension of the presidential vote to Puerto Rico if Puerto Ricans sought it in a referendum.

Redeployment Of Troops Could Aid Base In Puerto Rico

President Bush’s plan to redeploy 70,000 troops from foreign to domestic military bases has given congressional advocates of delaying a process to determine domestic base reductions from 2005 to 2007 a new argument: There might be a need for domestic bases that would otherwise be closed or cut.

And this could be encouraging news for those who want to see the largest remaining military base in Puerto Rico, the U.S. Army’s Fort Buchanan, remain open. Buchanan, which was considered for closure during a previous base reductions process, is viewed as a possible target of another process -- especially since the Calderon Administration lost the stationing of the Army’s Southern Command that had been brought to the base by the administration of Calderon predecessor Pedro Rossello (statehood party/D).

Under current law, a ‘Base Realignment and Closure Commission’ (a ‘BRAC’ Commission) would be empanelled next year to recommend the combination or shut down of bases. Defense Secretary Rumsfeld has proposed that 25% of domestic base capacity be cut and hopes that at least 20% will be. (The 70,000 troops cut would be 35% of U.S. troop stationing abroad.)

Under the BRAC process, the Congress and the President can only accept -- or reject -- the Commission’s recommendations. This process was established to prevent members of the Congress from saving favored bases through amendments to a base cut plan.

The House of Representatives version of the national defense programs authorization bill for the fiscal year that begins October 1 would delay the BRAC process until 2007. The Senate, by only two votes, rejected an amendment that would have done away with the 2005 BRAC effort.

The issue is a major item on the agenda of a ‘conference committee’ of representatives of both houses of the Congress named to reconcile differences between the two versions of the bill.

While Bush’s redeployment plan has given opponents of a 2005 BRAC process a new argument, however, Bush has threatened to veto the $447 billion bill if it would even delay the process.

Army Acts To Avert Calderon Diversion Of Culebra Clean-up

The U.S. Army this past Wednesday launched another maneuver to prevent Governor Calderon’s designation of the island of Culebra, PR on the National Priorities List for environmental clean-ups from taking effect.

The Army’s goal was to ensure the clean-up of parts of the island that still have debris from U.S. Navy target practice that ended 30 years ago.

Calderon’s ‘Superfund’ site designation including Culebra along with the island of Vieques, PR on the list would transfer responsibility for the clean-up of Culebra from the Army to the Navy. By doing this, it would end the Army Corps of Engineers’ $16 million Culebra clean-up program.

The Congressional Research Service recently reported that Calderon’s designation would not result in a more in-depth clean-up of Culebra because it would not apply greater clean-up standards than already apply to the Army’s Culebra program.

The congressional experts also said that the designation could result in less funding for the Culebra clean-up. By shifting responsibility from the Army to the Navy, Calderon is disqualifying Culebra from continued eligibility for Army funds under the Formerly Used Defense Sites program. The shift forces the Culebra clean-up to rely along with Vieques on funds from limited Navy appropriations for clean-ups. Without the designation, the Culebra clean-up would have continued to be funded by the Army and more Navy funds would have been available for the Vieques clean-up.

The Navy has begun a $125 million program for cleaning-up military debris on Vieques.

Calderon’s designation of the separate islands as a single up site also held up federal acceptance of the designation for half a year without increasing the clean-up standards for the former Navy-controlled land on Vieques or substantially increasing the funding for the Vieques clean-up.

Acceptance of the designation was delayed because of Army objections due to the designation’s interference with the existing Culebra clean-up program -- that were recently dropped -- and concerns within President Bush’s Office of Management and Budget about including separate land masses in one Superfund site designation.

In pointing out what Calderon was failing to accomplish through her designation and her imperiling of funding for the Culebra clean-up, the congressional report also noted what Calderon and Resident Commissioner Acevedo had failed to do to ensure funding. The 1974 law that ended Navy practice on Culebra includes ambiguous language that could either be read as prohibiting federal funding for a clean-up or prohibiting further uses of the land the Navy was using that would require federal clean-up spending. The report suggested that Calderon should have taken legal action and/or Acevedo should have sponsored legislation to clarify Culebra’s eligibility for clean-up funding.

The past week’s Army maneuver proposed to accelerate the existing Culebra program. The Army hopes that this will convince Calderon to withdraw her identification of Culebra as part of the Superfund site.

Prats Misleads In Blaming Fortuno, Rossello For End Of 936 Tax Exemption

"Commonwealth" party resident commissioner candidate Roberto Prats placed the blame on the wrong parties this past Wednesday in saying that his statehood party opponent and that party’s gubernatorial candidate were responsible for the federal government ending the federal tax exemption on profits that companies based in the States attribute to manufacturing in the territory, according to federal officials involved in the decision.

Prats, a territorial senator and chairman of the local Democratic Party committee said that statehood party congressional candidate Luis Fortuno (R) and gubernatorial candidate Pedro Rossello (D) gave up federal Internal Revenue Code (IRC) Section 936, got nothing in return, and lost Puerto Rico jobs when Fortuno was secretary of economic development and commerce in the past Rossello administration.

Section 936 was amended twice when Rossello was governor. In 1993, President Clinton renewed a proposal by President Reagan to replace the tax exemption with a credit based on wages paid in the territory. Rossello and Fortuno led a campaign against the proposal that resulted in a substantial compromise. It phased the section 936 tax exemption down from 100% to 40% and it created a preferred alternative credit for capital investments and local taxes as well as wages paid.

The compromise also gave Puerto Rico a larger share of collections of federal excise taxes on rum produced in the territory and foreign countries than it received before.

Like Reagan, Clinton and the Democratic Congress cut the 936 tax exemption because it was an excessively costly way of accomplishing its purpose of creating jobs in U.S. territories. Further, it was persistently abused by companies with operations in Puerto Rico despite laws and regulations intended to make it more reasonable and efficient. In fact, its use was so outlandish it was labeled the "poster child of corporate welfare," masking disproportionate benefits to companies under the guise of much lesser benefits to Puerto Rico.

Section 936 enabled companies to avoid more taxes than they paid in wages. It also was abused by companies attributing earnings to Puerto Rico that were really due to work in the States. The purpose was to shelter more income from taxation.

After Republicans captured majorities in both Houses of the Congress in 1994, House Republicans sought to prove they were not the party of ‘corporate welfare’ as Democrats charged by phasing out 936 altogether by 2006. Rossello got Clinton to object in vetoing the legislation that included the phase-out. Clinton said that there should be some incentive for encouraging economic activity in Puerto Rico.

In 1996, however, the Congress added the phase-out to another bill. This bill raised the minimum wage and provided tax relief to small businesses. With the bill certain to become law, Rossello lobbied for the tax credit for wages, investments, and local taxes to be saved as IRC Sec. 30A.

Clinton and the Senate agreed with Rossello. The Senate Finance Committee -- and later the Congress’s Joint Committee on Taxation -- explained the fundamental objection to a tax benefit applying to just some U.S. companies (such as those that located operations in U.S. territories) versus their competitors (that operated in the States).

The effort to save the wage-based credit was undercut in the House, however, by "commonwealth" party lobbying to save the 40% tax exemption instead. But an amendment to save the exemption won only 10 votes in the 435-vote House.

At the insistence of the chairman of the House Ways and Means Committee, the final 1996 law then established sec. 30A but phased it out along with sec. 936.

In response to lobbying by Rossello, Clinton proposed to extend sec. 30A past 2005 every succeeding year of his presidency. And along with Clinton, Rossello was responsible for gaining the support of enough Republicans along with virtually all of the Democrats in both houses of the Congress to win majorities for an extension. But the chairman of the House Ways and Means Committee -- whom commonwealthers had lobbied to save the 936 tax exemption instead -- blocked each 30A extension proposal.

In addition to almost all collections of taxes on Puerto Rican and foreign rum, Clinton and Rossello did, however, also obtain the extension of the tax credit that companies can take for research and product development costs to Puerto Rico as partial compensation for the phase-out.

With the 2000 retirement of the Ways and Means Committee chairman who blocked the extension of 30A, the stage was set for an extension in 2001. But Governor Calderon, Prats’ mentor, and Resident Commissioner Acevedo, Prats’ running-mate this year, opposed congressional initiatives to extend 30A although they were elected in 2000 pledging to obtain an extension.

Ironically, many companies that used the 936 tax exemption have increased employment in Puerto Rico since 936 was sunset. In the biggest user, the pharmaceutical industry, employment has increased overall.

Instead, most manufacturing job losses have taken place in companies that have used the 30A credit that Calderon and Acevedo gave up and that other commonwealthers undermined.

Further, manufacturing job losses in Puerto Rico have been lesser on a relative basis than manufacturing job losses in the States since the 936 sunset took effect. Additionally, the Puerto Rico job losses that have occurred have been primarily attributable to wage and other cost competition to labor-intensive manufacturing in Puerto Rico from foreign low-wage and other cost countries due to new international free trade agreements.

The "Washington Update" appears weekly.

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