| Calderon Cuts 956 Amendment Cost to $200 Million a Year
Governor Sila Calderon ("commonwealth" party/no national party) has agreed to changes to her proposal to permanently exempt from federal taxation 90% of the profits that manufacturers based in the States earn in Puerto Rico. The changes may cut the congressional cost estimate of the proposal to $200 million a year. The proposal would amend Section 956 and other provisions of the federal tax code.
Calderon had won important congressional sponsorship of the proposal by claiming that it would only cost $100 million-$150 million a year. She based the claim on an estimate that she paid the accounting firm Pricewaterhousecoopers to prepare.
But the proposal was called into serious question when Congress’ Joint Committee on Taxation staff estimated that it would actually cost over $3.2 billion a year during its first 11 years.
When news of the congressional estimate broke, Calderon’s representatives began to campaign furiously to get it reduced. Their first effort deployed the tax aides to House of Representatives Ways and Means Committee Ranking Democrat Charles Rangel (NY) and Second Ranking Republican Phillip Crane (IL) to try to pressure the Joint Committee staff.
Calderon’s aides then agreed to drop the provision of the proposal that would have enabled companies to transfer "intangible assets" such as patents and trademarks to their tax-exempt Puerto Rican subsidiaries without paying any tax. This reduced the congressional cost estimate to an average of $1 billion a year over the 11 years.
Since then, a Pricewaterhousecoopers expert who is a former senior aide to the Joint Committee has been trying to figure out how to further reduce the proposal’s cost. Other changes that Calderon has agreed to make would cut it to about $500 million a year. Further changes that Calderon has now decided to make would cut the cost to $200 million a year, the Pricewaterhousecoopers expert has reported. He bases the claim on conversations with his former Joint Committee colleagues.
Reducing the proposal’s cost from $3.2 billion a year to $200 million a year has removed a major impediment to its passage. But this has not, however, eliminated the tax policy concerns about the proposal among key aides to the chairmen of the committees that would have to approve it: Ways and Means and Senate Finance.
Calderon: I am One of Puerto Rico’s Most Beloved Leaders
The Calderon Administration placed an advertising supplement in the New York Times this month stating that Calderon is "one of the commonwealth’s most beloved political leaders." The ad also made other interesting statements.
Another boast was that manufacturing "disaster has been avoided thanks to the capable management" of Calderon and Economic Development and Commerce Secretary Ramon Cantero Frau.
Cantero’s agency probably paid for the costly ad. In it, Cantero said that the islands’ current status is "the best of both worlds" referring to a U.S. and a non-U.S. status. Rather than accurately describe the islands’ status as a territory of the U.S., the ad said, however, that "Puerto Rico is a self-governing commonwealth in association with the United States."
The ad also limited the role of the president of the United States in Puerto Rico to being a "head of state" and said Puerto Rico’s government is "run" by Calderon. A head of state is a titular leader of a country and not necessarily head of its government. The government of the United States is, of course, Puerto Rico’s national government.
The ad further said that "there are several actors on the Puerto Rican political state that like to stress the points of friction" between Puerto Rico and the U.S. but "Puerto Rico’s disagreements with Washington are curiously state-like." And it said that Calderon, however, is a "strong supporter" of democracy. Calderon, however, opposes Puerto Rico obtaining a political status under which Puerto Ricans would vote for their national government officials.
The ad featured two of Puerto Rico’s 78 municipalities: the capital city of San Juan and Caguas. Caguas’ mayor, Calderon’s fellow "commonwealth" party member Willie Miranda Marin, was prominently featured in the ad, but San Juan’s mayor, statehood party member Jorge Santini, was not mentioned.
The ad said that "Washington places a high importance on Puerto Rico’s influence and privileged position within the Caribbean." It said this "has helped seal many regional economic and cultural partnerships." It provided no back up for these assertions. In fact, State Department officials say that Caribbean and Latin American countries prefer to deal directly with U.S. government representatives rather than through Puerto Rico officials.
The ad said that manufacturing had surpassed agriculture as the basis of the islands economy "in recent years." The transformation occurred decades ago.
956 Amendment Top Goal of U.S. Voter Registration Drive
Governor Calderon’s primary goal for her drive to register residents of States who have Puerto Rican roots as voters in the States is to win approval of her proposal for tax exemptions for the Puerto Rico income of manufacturers based in the States, a representative says.
The drive, which will cost at least $4.3 million this year, aims to register 600,000 to 700,000 people to vote. Calderon reportedly hopes that the drive in Florida, where President Bush’s brother is up for re-election as governor, will cause Bush’s chief political adviser, Karl Rove, to shift the Bush Administration to support of the proposal. To date, the Treasury Department has told congressional tax writers that it does not like the proposal and the White House has avoided comment on it.
Another major goal of the drive is increased funding for Puerto Rico in the federal social programs in which it is not treated equally with the States. This goal is interesting since, before her election, Calderon criticized former Resident Commissioner Carlos Romero-Barcelo (statehood party/D) for seeking additional "welfare" funding.
A third-ranking goal of the registration drive is getting Puerto Rico exempted from federal laws that inhibit business activity.
The Calderon Administration has given contracts worth $1.5 million a year to the Edelman public relations office in Washington. The registration drive and the tax benefits for companies based in the States are primary assignments for the firm.
Jeb Bush, Texas GOP Support Status Choice
While Governor Calderon hopes to use her drive to register voters in Florida to get the Bush Administration to support her federal agenda, Florida Governor Jeb Bush is seeking support from pro-statehood Puerto Rico Republicans and supporting their agenda for the status of the territory. And President Bush’s home state party, the Texas Republican Party, is also supporting their status agenda.
Governor Bush recently asked Puerto Rico Republicans for support in his re-election race, supported a status choice and indicated his hope that the choice would be statehood. He earlier traveled to the islands to raise funds from Puerto Rico Republicans. Calderon tried to play a dominant role in the trip but disengaged from it when she was not given the role that she wanted.
The Texas Republican State Convention, meanwhile, earlier this month called for Puerto Ricans to make a choice between statehood and independence for the territory.
Calderon Pushes White House to Honor Commonwealth Constitution
White House staff say that Governor Calderon is vigorously lobbying to have President Bush send a delegation to her planned major ceremony commemorating the 50th anniversary of Puerto Rico’s local constitution July 25th.
Presidential representatives or messages to ceremonies marking the constitution are typical, although President Bush did not acknowledge the date last year. In earlier years, President Clinton sent messages, sometimes through a representative. Clinton’s messages supported Puerto Ricans being able to determine the islands’ future status among all its options: statehood and nationhood as well as a continuation of the territorial status.
Bush did, however, send a representative to the ceremony July 27th last year that honored the founder of the islands’ statehood movement. His intergovernmental affairs chief, Ruben Barrales, who co-chairs the President’s Task Force on Puerto Rico’s Status, said that Bush supports Puerto Ricans choosing their ultimate status between the two courses open to the islands for a permanent status: statehood and nationhood.
Navy Research Center Reports on Vieques Alternatives
The Center for Naval Analysis has given Navy officials a report on alternatives to the Navy’s Vieques range. The report is expected to be the basis of a decision of whether Navy and Marine Corps training at the range will end by May 1, 2003.
Under a law enacted last year, the Secretary of the Navy will make the decision after considering the recommendations of the top commanders of the Navy and Marine Corps. The law permits the range to be replaced when there is a replacement way of training that provides at least equal training.
Navy Secretary Gordon England and the Bush Administration hope to replace the range by May 1, 2003. The date was included in an agreement between the federal and Commonwealth governments worked out in 2000 by President Clinton and Governor Pedro Rossello (statehood party/D).
Congress repealed the requirement that training at the range end by that date when Governor Calderon broke the agreement with a lawsuit, lobbied to have the end of training occur immediately, opposed the referendum on Vieques that would have determined that the training would end May 1, 2003, and conducted a referendum that called for the training to end immediately.
The range has been prized by the Navy and Marine Corps because it is the only place in the eastern area of the United States available for practices including all of the tactics involved in amphibious combat invasions -- Marines landing on shore, shelling from ships, and bombing from planes.
Statements by England and other Navy officials suggest that they may be willing to dispense with practices including all of the tactics. Instead, the tactics would be practiced separately, possibly with computer simulation of other tactics.
It remains to be seem whether the military’s commanders -- and Congress -- will consider such training to be equal to Vieques range training. Navy commanders are, though, increasing training at other ranges where all the tactics cannot be employed. They are also planning for training using longer-range weapons than are used in firing at the Vieques range.
Acevedo Vila Posts, Takes Down Poorly-Written Web Site
Resident Commissioner Acevedo Vila recently announced with great fanfare the posting of his official congressional website on the Internet. The development came more than three quarters of the way through the first of the two Congresses in which he was elected to serve. But he was forced to take the site off the Internet soon afterwards: It was plagued with grammatical errors.
Acevedo posted the site when he was criticized for having not posted it well after he spent substantial sums to have it professional produced. Virtually all other Members of Congress have sites accessible through the address of the House of Congress in which they serve.
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