New US House Chairman Open to Status Choiceby Contributing Editor
The next chairman of the U.S. House of Representatives committee with general jurisdiction over the governing of U.S. territories has suggested that he would support legislation providing for Puerto Ricans to vote on the territory’s status.
Representative Rob Bishop (R-Utah) voted against a bill that the House passed in 2010, which would have provided for a Puerto Rican status plebiscite. He said in an interview with El Nuevo Dianewspaper, however, that he would probably “vote differently” on such a bill now.
The incoming chairman of the House Natural Resources Committee added that he would meet with the territory’s representative in the House who serves on the Committee before taking positions on Puerto Rico status questions. He would do so because “I want to be deferential to Commissioner Pierluisi,” he explained to correspondent Jose Delgado.
Although Puerto Rico’s resident commissioner cannot vote on legislation in the full House, he or she can vote on legislation in committees. Resident Commissioner Pedro Pierluisi is aligned with Democrats nationally and was the lead sponsor of the 2010 bill Bishop voted against. Now head of the territory’s statehood party, Pierluisi has requested a meeting with the 12-year representative from Utah to discuss the status issue.
Unsurprisingly for an incoming chairman of the committee with general jurisdiction over the governing of territories, Bishop was unhappy that the law the Federal government enacted in January providing for a Puerto Rican status plebiscite went to the full House from its Appropriations Committee rather than from the Natural Resources Committee. He would have preferred that the Natural Resources Committee originate legislation on the issue.
Recognizing that outgoing Chairman ‘Doc’ Hastings (R-Washington) has not held a hearing on the issue even though Puerto Ricans voted to reject territory status and choose statehood among the alternatives through a plebiscite under local law in 2012 and even after the Government Accountability Office (GAO) did a major report on the Federal budgetary impacts of statehood at his request, Bishop said “As Chairman of the Committee, I will be more open to discussion.”
Hastings raised questions about statehood on budgetary and cultural grounds before the 2012 plebiscite and before the GAO issued its report. The report noted the Federal and insular budgetary benefits of statehood as well as the costs.
The current Committee Chairman has been silent on the issue, however, since these developments, although he initially planned last year to hold a hearing on the plebiscite results and the GAO report.
Bishop’s openness on the issue may relate to his background. He was a high school teacher for 28 years who primarily taught American history and government. He is also a member of the Church of Latter Day Saints, like Puerto Rico-born representative from Idaho Raul Labrador (R), whose district shares a border with Idaho. Labrador favors statehood for Puerto Rico.
Bishop was a member of the Utah House of Representatives for 16 years – ultimately its Speaker — before being elected to Congress. He has also been Chairman of the Republican Party in Utah. This gave him a seat on the Republican National Committee, where he served with Puerto Rico statehood advocates.
Federal Plebiscite Law
The Puerto Rican status choice law enacted in January provides for a plebiscite on options proposed by the Commonwealth Elections Commission that can resolve the issue and are found by the U.S. Justice Department to not conflict with the Constitution, laws, and policies of the United States. It includes $2.5 million for the plebiscite to be granted by the Justice Department to the Elections Commission.
The known possible options for the plebiscite are statehood and nationhood, either fully independent from or in an association with the U.S. that either nation could end.
The current territory status, sometimes misleadingly called “commonwealth” after a word in the official name of the insular government, cannot be an option because it cannot resolve the issue. As long as Puerto Rico is a territory, its people — U.S. citizens by birth under current law — will be able to petition for statehood or nationhood.
The January law was proposed by the Obama White House and the Justice Department and championed in the House by Frank Wolf (R-Virginia), chairman of the Appropriations Committee subcommittee that handles legislation funding the Justice Department, Representative Jose Serrano (D-New York) who was born in Puerto Rico, and Pierluisi.
The Obama White House supported Puerto Rico’s plebiscite and hailed its results. It was concerned, though, that opposition from Governor Alejandro Garcia Padilla and his ‘commonwealth’ party majorities in each house of Puerto Rico’s Legislative Assembly would result in inaction on the self-determination decision of Puerto Ricans.
Garcia Padilla and the ‘commonwealth’ party legislators disputed the plebiscite and its results because the vote’s “commonwealth” option was Puerto Rico’s current territory status and not the new “commonwealth status” the party had proposed.
Under the proposal for an unprecedented “commonwealth status,” the U.S. would be permanently bound to Puerto Rico and to an arrangement under which the Commonwealth government could nullify the application of Federal laws and Federal court jurisdiction and enter into international agreements and organizations as if Puerto Rico were a sovereign nation.
The U.S. would also be obligated to continue to grant citizenship to individuals born in Puerto Rico, all current assistance to Puerto Ricans, and free entry to any goods shipped from Puerto Rico. It would, additionally, have to grant a new subsidy and most Federally owned land in Puerto Rico to the Commonwealth.
The Obama, George W. Bush, and Clinton Administrations rejected the proposal as impossible forconstitutional and other reasons, as have Republicans and Democratic congressional committee leaders.
The Obama Administration and congressional sponsors of the Federal plebiscite law reasoned that U.S. Justice Department agreement to the plebiscite’s options would make it more difficult for ‘commonwealth’ party elected officials to dispute the plebiscite’s options.
Other Legislation
In addition to the Federal plebiscite law, 130 members of the U.S. House from both national political parties led by Pierluisi and three U.S. senators sponsored bills in this Congress to provide for statehood for Puerto Rico if Puerto Ricans vote for equality within the nation a second time.
Pierluisi has not said what efforts he will make in the new Congress that takes office in January to advance statehood for the territory.
New Committee Leaders
Republicans will continue to have absolute control of the House. They will also take a majority of seats in the Senate but not control on most issues since that requires a three-fifths majority in the Senate.
One of the members of the House who joined Pierluisi in sponsoring his statehood bill, Raul Grijalva (D-Arizona), will become the new senior Democrat on the Natural Resources Committee.
Grijalva has said that he sponsored the bill to promote resolution of the Puerto Rico’s central issue and that he does not have a preferred status for the territory.
Lisa Murkowski (R-Alaska) will chair the Senate committee with lead responsibility for legislation on the governing of Puerto Rico in the new Congress, Energy and Natural Resources. Murkowski has said that she will support statehood if it is desired by a majority of Puerto Ricans but that the initiative for it should originate in Puerto Rico.
She has been among those who have said that the “commonwealth” proposal cannot be a status option.
She also recognizes that a majority of Puerto Ricans rejected the current territory status in the 2012 plebiscite. But she views the vote as not making it clear whether there is majority support for statehood.
Current Chairwoman Mary Landrieu (Louisiana), a strong supporter of statehood for Puerto Rico, will become the senior Democrat on the Committee if she wins a run-off election for the Senate seat she now holds December 6th.
If not, that Committee post will go to Maria Cantwell (D-Washington). Cantwell thinks that the current territory status is bad for the U.S. budget and bad for Puerto Rico’s economy. She is inclined towards nationhood for Puerto Rico.
The post New US House Chairman Open to Status Choice appeared first on Puerto Rico Report.
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Senior US Senator: Close Puerto Rico Tax Loopholeby Contributing Editor
A senior U.S. senator identified closing the tax loopholes that enabled Microsoft to avoid $4.5 billion in Federal income taxes 2009-11 by attributing up to 47% of its sales in the western hemisphere to its Puerto Rico subsidiary as one of his two top priorities.
Carl Levin (D-Michigan) targeted the loopholes in a C-Span interview broadcast late yesterday.
The first priority that the Chairman of the Committee on Armed Services named was a bill to authorize spending for the Defense Department. He said that he hopes to help get the bill enacted into law this month during the final ‘lame duck’ session of the current Congress.
The second priority he raised was closing the tax loopholes. He has zeroed in on the means for tax avoidance as Chairman of the Permanent Subcommittee on Investigations of the Committee on Homeland Security and Government.
Levin added that closing the loopholes will “probably be left undone” when he leaves the Senate January 6th with the seating of the next Congress.
The senior Republican Party member of the Subcommittee, John McCain (Arizona), has worked collaboratively with Levin on the issue. The 2008 Republican presidential nominee is expected to succeed Levin in both chairmanships in the next Congress.
36-year senator Levin, who is 80, is voluntarily retiring. His older brother Sander, 83, will remain in the U.S. House of Representatives, where he is the top Democrat on the Ways and Means Committee, which has jurisdiction over tax among other matters.
Senator Levin said that the “loopholes,” which enable Microsoft to avoid U.S. taxation through Puerto Rico and Ireland and Apple to avoid Federal taxes trough Ireland, are “gimmicks … which don’t serve any justified economic purpose.”
He explained that the loopholes enable manufacturing companies in the States “to shift their revenue … profits and IP [intellectual property, or patents] to themselves, to their own shell corporations in tax havens to avoid paying taxes.”
Prevents Important Spending
The senator said that this costs the Federal government revenue it needs “to avoid another round of sequestration, which is this absolutely mindless way to cut the budget … an automatic cookie-cutter approach.”
He went on to say that most in Congress “really want to end sequestration from whatever perspective, whether it is domestic programs, like education, roads, healthcare, or whether from the national security perspective.
“So, we need to close the unjustified tax loopholes that don’t serve any economic purpose in part to use that revenue … in these important areas, such as national security, education, and so forth.”
Dozens of companies use Puerto Rico for the loopholes and tax avoidance the way that Microsoft does, a topic that was the subject of a Congressional hearing conducted by Senator Levin in 2012.
The current sequestration was enacted into law through a budget compromise between President Obama and congressional Republicans in 2011, and began to take effect last year. It provides for most Federal programs to have spending cut by one of a few percentages without regard to reason. The totals of reductions in national security programs on one hand and domestic programs on the other are in equal dollar amounts.
The process was considered by both sides to be so bad that it would force both to compromise on changes in tax and spending policies. It has not really worked, however, and national security leaders like Levin have been particularly concerned as national security programs are cut by a larger percentage than domestic programs.
The Loopholes
The basic tax loophole that disturbs Levin and tax policymakers ranging from Obama to House Ways and Means Committee Chairman Dave Camp (R-Michigan) enables U.S. companies to set up corporations outside of the U.S., transfer patents and trademarks (brand names) developed in the U.S. that are responsible for most of the profits from products to the subsidiaries, and not pay taxes on income of the operations unless the profits are actually transferred to the parent companies.
The Puerto Rico loophole does not include the territory in the definition of the U.S., although Puerto Rico is fully a U.S. territory. So, companies in the States can set up tax avoiding “Controlled Foreign Corporations” in Puerto Rico that receive most of the benefits of being in the U.S. without the tax responsibility borne by business in the U.S.
Loopholes Unintended
Companies began major exploitation of the loophole after the Federal government enacted a law in 1996 ending by 2006 a tax elimination (or, after 1993, a tax reduction) incentive for companies based in the States to operate in Puerto Rico.
One major reason that Congress overwhelmingly voted to end Federal Internal Revenue Code Section 936 was because it was being abused in the same way that companies are now taking unintended advantage of the Puerto Rico tax loopholes that Levin, Obama, Camp, and Senate Finance Committee Chairman Ron Wyden (D-Oregon) want to end: shifting ownership of profit-generating patents and trademarks to territorial operations to avoid taxes.
In the cases of many companies, the tax avoidance was much larger than the economic benefits of their operations to Puerto Rico. Sec. 936 was enacted to encourage companies in the States to make job-creating investments in the territory.
According to the Joint Committee on Taxation, Congress also decided that there should not be a greater tax incentive to do business in the territory than in a State.
Retards Economic & Political Growth
The tax loopholes, like Sec. 936 before, have left Puerto Rico with an underdeveloped economy, one that has underperformed the economies of the States for four decades and one that has been negative for all but one of the last nine years.
Puerto Rico’s “commonwealth” party uses the relatively small economic benefits of the loopholes to argue against equality for Puerto Rico and Puerto Ricans in the U.S.: statehood. It used the relatively small economic benefits to the territory of Sec. 936 to argue against equal treatment of Puerto Rico in the nation.
A majority of Puerto Ricans have voted against territory status, however, and a more than three-fifths majority has voted for statehood among the alternatives to territory status.
The “commonwealth” party has made several proposals for an unprecedented “commonwealth status” but all have been rejected by the Federal government as impossible for constitutional andother reasons.
The post Senior US Senator: Close Puerto Rico Tax Loophole appeared first on Puerto Rico Report.
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Legislation to require the Department of Defense to decontaminate and remove military munition debris from the Northwest Peninsula of Culebra is poised to become federal law.
Culebra is an archipelego near the main island of Puerto Rico which was inhabited first by the Carib, then by the Taino, and at last in the 1800s by European settlers and pirates. In the early 1900’s, Culebra became a U.S. Navy installation in under President Theodore Roosevelt, who also established a bird sanctuary there.
The Navy used Culebra as a bombing practice site and gunnery range for over seventy years until 1973, when the U.S. Congress called for the abandonment of Culebra by the Navy and the movement of the military operations to Vieques.
In 1982, the federal government conveyed over 900 acres of land on Culebra to the government of Puerto Rico for public use. The conveyed land includes about 400 acres on the Northwest Peninsula that the U.S. Department of Defense has contended are ineligible for federal funding otherwise authorized for land decontamination due to a provision in the 1973 law. The Department contends that Culebra was not included in a 1986 federal law that requires decontamination of its former military sites.
“As a result of this restrictive legal interpretation, the Northwest Peninsula is the only former defense site—of several thousand across the United States—that the Department of Defense contends it is barred by statute from decontaminating. The status quo poses a threat to human safety, since this area of Culebra is visited by over 300,000 people a year and yet contains unexploded bombs that could cause grave harm,” said Pedro Pierluisi, Puerto Rico’s Resident Commissioner.
Pierluisi introduced legislation to rectify the problem five years ago. More recently, the Pierluisi proposal was included in the House of Representatives version of National Defense Authorization Act for Fiscal Year 2015 (NDAA). Sen. Kirsten Gillibrand (D-NY) and Sen. Richard Blumenthal (D-CT) introduced a related proposal as an amendment to the Senate version of the legislation, which was approved by the Senate Armed Services Committee by a vote of 20-6. The final legislation was released yesterday.
Section 317 of the NDAA removes the ambiguity over the 1973 law with respect to Culebra. The bill explicitly notes that “[i]t is the sense of Congress that certain limited portions of the former bombardment area on the Island of Culebra should be available for safe public recreational use while the remainder of the area is most advantageously reserved as habitat for endangered and threatened species.”
The NDAA is expected to pass Congress and be signed into law by President Obama before Christmas.
The post Culebra Cleanup Remedy On Track to Become Law appeared first on Puerto Rico Report.
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Territory Worst ‘State’ in Nation Financially: 51 of 51by Contributing Editor
Puerto Rico is the worst “state” in the nation fiscally, according to Barron’s, the country’s leading weekly newspaper on financial matters.
A cover story entitled, “The Best and Worst States” identified the territory as Number 51 of 51 “states” — the worst … and by far.
Although Puerto Rico is not a State of the Union, the Federal government has authorized it to exercise the authority over local matters that States of the U.S. possess. Unlike the actual States, however, it does not have votes in the government that make its national laws, depriving it of the influence needed to develop its economy.
As a possession that has not been made a permanent part of the U.S., it is also treated differently than the actual States in many Federal programs — costing its people and its economy billions of dollars a year.
The territory has more people than two-fifths of the actual States of the U.S.
Puerto Rico scored a distant last in all four categories on a chart prepared with data supplied by Eaton Vance, one of the oldest investment management companies in the U.S.
- The territory has to pay 8.3% more than what “AAA” rated municipalities in the actual States have to borrow money for 10 years. Half a dozen actual States pay no more than “AAA” rated municipalities. Illinois, the actual State that has to pay the most, only has to pay 1.5% more.
- Puerto Rico was the only “state” with “B” level bond ratings from national debt rating agencies Moody’s and Standard and Poor’s. All of the actual States had “A” ratings.
- The territory’s pension debt and healthcare liabilities as a percentage of Gross Domestic Product was 87.8%. The percentage of the best actual State in this respect, Nebraska, was only .8%. The worst actual State percentage was that of Hawaii, with 42.3%.
- Puerto Rico’s jobless rate was 14.3%. The rate in the best actual State, North Dakota, was 2.7%. The actual State with the worst percentage was Rhode Island, with 8.9%.
Also Worse than Most Nations
The article began with the finding that, “U.S. states represent one of the most secure areas of the global bond market.” It made clear that the territory of Puerto Rico was the biggest exception.
“Puerto Rico remains in a class by itself,” the report said, “with far higher yields [the amount it has to pay for its bonds in comparison to the amount borrowed] than those of any State and a poor economic and financial situation.
It noted that the $3.5 billion in bonds that the Commonwealth government sold in March now trade “at 87 cents on the dollar for a 9.4% yield.”
“Few dollar denominated bonds from any country yield as much,” it pointed out.
The report than observed that, “The issue for investors is whether that yield compensates for the risk, especially” since the “commonwealth” party controlled government enacted a law in June that supposedly enables the territorial government to cancel its debts.
Outlook for Territory Poor
Looking to the future of the territory, it was reported that, “There’s little evidence that the depressed Puerto Rico economy is turning around and the island remains burdened by a badly underfunded pension plan.”
Additionally, “Eaton Vance analysts cite other negatives, including high electricity costs, population loss, and a looming budget cap in the current fiscal year.”
Replacing Territory Status the Answer
In studying Puerto Rico’s poor and worsening fiscal situation, President Obama’s Task Force on Puerto Rico recognized that the question of the territory’s ultimate status “and the economy are intimately linked … identifying the most effective means of assisting the Puerto Rican economy depends on resolving the ultimate question of status.”
This question is: whether Puerto Rico will eventually become an actual State of the U.S. or a separate nation and how much longer it will remain in the territory status that retards its economic growth.
The presidential task force on the territory concluded that, “the long-term success of Puerto Rico is ultimately linked to a resolution of the status question.”
In Puerto Rico’s November 2012 elections, a solid majority of voters opposed continuation of territory status and a more than three-fifths majority chose statehood among the alternatives.
Because a majority of very narrowly elected insular officials who opposed the results lobbied against Federal action to implement the self-determination decision, the Federal government in January provided for a plebiscite on an option or options that can resolve the issue under U.S. Justice Department auspices. This would make it more difficult to dispute the results of a vote.
The options could be statehood and nationhood. Continued territory status could not because it cannot resolve the issue. By definition, it is temporary and Puerto Ricans would still be able to seek statehood or nationhood.
The post Territory Worst ‘State’ in Nation Financially: 51 of 51 appeared first on Puerto Rico Report.
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Remembering Herman Badillo by hadeninteractive
Herman Badillo, the first U.S. congressman born in Puerto Rico, died this week at the age of 85. Badillo represented New York’s 21st District in the House of Representatives from 1971 to 1977. He was known for his support of New York’s Puerto Rican community as well as broader human rights and the concerns of all underrepresented groups, including the urban poor and ethnic minorities.
Badillo was born on Aug. 21, 1929, in Caguas, Puerto Rico. He came to New York to live with relatives after losing his parents to tuberculosis as a preschooler. He attended New York City public schools, and then went on to graduate from City College of New York. He earned his LLB from Brooklyn Law School, graduating first in his class.In 1966, he was elected Bronx borough president, a position he held until 1969. In 1968, he served as a delegate to the Democratic National Convention.
In 1970, Badillo became the congressional representative for the South Bronx, the first person born in Puerto Rico to become a Congressman. He was one of the founders of the Hispanic Congressional Caucus. He spoke up for the people of Puerto Rico, pointing out that they were subject to the draft, but were not included in social programs such as food stamps and school milk programs.
Badillo left Congress in 1977 to become Deputy Mayor of New York, a position which he held until 1979. Badillo had run for mayor repeatedly, first as a Democrat and then as a Republican, but was not successful in his campaigns. He continued to work for the city, in positions including Special Counsel on education policy and Chairman of the Board of Trustees of the City University of New York, until he returned to private law practice in 2005.
Education was of particular importance to Badillo, who was known for encouraging higher standards in public schools from elementary school to college. CUNY in particular was a priority for Badillo.
Badillo was not only the first Congressman from Puerto Rico, but the first Bronx borough president and the first to run for mayor of a major mainland city. He called himself “the first Puerto Rican everything,” and a large and loyal community mourned his passing on Wednesday.
The post Remembering Herman Badillo appeared first on Puerto Rico Report.
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SAN JUAN, Puerto Rico A pilot who runs an executive jet company that has transported the president of Guyana was arrested after U.S. agents found more than $600,000 in undeclared cash inside his aircraft during a stop in Puerto Rico, authorities said Wednesday. Khamraj Lall, the CEO Exec Jet Club LLC, was in custody at a federal jail in San Juan on suspicion of intent to evade currency reporting, said Carol Torres, a spokeswoman for U.S. Immigration and Customs Enforcement.
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