Congressman Faleomavaega announced today that in a letter dated October 26, 2007 he has responded to Senate President Lolo’s concerns about minimum wage and section 30A. The complete text of the Congressman’s letter, which was copied to Senator Inouye, Governor Togiola, the Lieutenant Governor, the Senators, the Speaker and Representatvies, Deputy Assistant Secretary Cohen, and OIA Director Nikolao Pula, is included below:
Dear Mr. President:
This is to acknowledge your letter of October 8, 2007 regarding section 30A in which you lament an increase in minimum wage for our lowest paid workers and suggest that we do not need a US Department of Labor study to assess American Samoa’s economy for the well-being of our people today and in the future. You also called into question the extension of 30A tax benefits for our canneries, indicating that you are unaware of my efforts and whether or not an extension of section 30A is still being pursued.
For your information, since 2003, I have written to our Governors and copied every Member of the Fono, including your office, outlining each and every step I have taken to make sure section 936 (and now 30A tax benefits) are extended for American Samoa’s canneries. I have also copied my letters to Senator Inouye and provided his office with numerous updates regarding my work in relation to IRS section 936, 30A, and minimum wage legislation. Duplicate copies of these letters are on file in my office. If you would like, I would be more than happy to forward these materials to you again.
By way of this letter, let me reassure you once again of my efforts to protect American Samoa’s economy. As I stated in my most recent letter to Governor Togiola, which I also copied to you, I introduced legislation in April of this year to extend 30A tax credits. I also met with the representatives of both canneries and with Congressman Charles B. Rangel, Chairman of the House Ways and Means Committee, to solicit their support. As you are aware, the House Ways and Means Committee is the committee of jurisdiction, meaning it is the only committee in the House that can move this legislation forward. Chairman Rangel assured me when the appropriate legislative vehicle becomes available, he will include our proposed tax extension and work to extend it for as many years as may be possible. He kept his promise and, as of yesterday (October 25, 2007), included a one-year extension for our canneries in H.R. 3970, a bill to amend the Internal Revenue Code of 1986 to provide additional tax relief to low and moderate income individuals, to repeal the individual alternative minimum tax, to reform the corporate income tax, and for other purposes.
While this is not what we asked for, Chairman Rangel has to give equal treatment to all Members who have asked for similar requests. As he explained, every other tax extender received the same extension of one-year only because this is an $80 billion tax package that needs to move forward without complication or delay. Chairman Rangel has promised to continue to work with me on a more permanent solution for American Samoa, and I will keep our people informed as the matter progresses.
As I have stated before, while 30A tax credits are important, the original purpose of section 936 (now 30A) tax provisions was to enhance the ability of U.S. firms operating in US territories and possessions to compete with foreign firms. These tax credits encouraged our tuna industry to stay in American Samoa. However, we cannot be so naïve as to think that by resolving the issue of section 30A that our two canneries will remain in American Samoa for another fifty years. Nothing could be further from the truth.
As I have informed the Fono on many occasions for the past ten years, our tuna industry faces serious challenges as a result of certain free trade agreements including ones pending with the Andean countries and Thailand. Thailand is already the biggest exporter of tuna in the world yet the Andean countries also can wipe out American Samoa’s entire tuna industry. While the federal government has supported my efforts in making sure tuna is considered highly import sensitive, we must also be successful in keeping canned tuna in the longest phase out possible and we must protect our albacore base, or all of our efforts will be in vain and will hasten either the closure or downsizing of our canneries.
But even if we are successful in these areas, American Samoa cannot control world wage rates. For now, a tuna cannery worker in American Samoa is paid about $3.76 per hour. In Thailand and the Andean countries, cannery workers are paid .60 cents and less per hour. These are the realities facing American Samoa. And this is why almost ten years ago, at my request, former US Secretary of the Interior Bruce Babbit approved $600,000 and by Secretarial Order established the American Samoa Economic Study Commission which was chaired by former Governor John Waihee.
The Commission conducted a most comprehensive review and examination of the status of American Samoa’s economy. With its final report issued in 2002, ASG has still not acted on the recommendations of the American Samoa Economic Advisory Commission. Certainly my office has not been made aware of any economic development plan put forward by the American Samoa Government (ASG) based on the Commission’s findings and recommendations. My office has also not been made aware of the outcome of the Governor’s initiative funded by the US Department of the Interior at a cost of $91,000 for purposes of replacing IRS section 936.
I am also unaware of any effort on the part of ASG to review its local tax policy. On the one hand, ASG is demanding the federal government to extend 30A tax credits. On the other hand, ASG refuses to get serious about doing its part locally. If our local Legislature is truly sincere about economic development, it is time for tax rates to be publicly debated and defined by our local government. In this manner, tax rates would be known in advance by any investor or industry wishing to conduct business in the Territory. In turn, ASG would have a better sense of what it could expect in tax revenues.
I also believe the Territorial Tax Exemption Board has served its usefulness and ASG needs to standardize, by law, corporate tax rates, exemptions, tax holidays, and capitalization requirements so that investors and companies that want to conduct business in the Territory will be treated equally under the law. This will eliminate favoritism and nepotism and none of us will be left to wonder why some businesses pay one rate while others pay another.
Given that you are appointed to represent local interests, I am hopeful that you will work hand-in-hand with the elected leaders of the Fono as well as the Governor to define a local economic policy that will complement my efforts at the federal level. Until the Fono and Governor’s office develop one policy and speak with one voice on economic development for ASG, it will be difficult to address the complexities facing the Territory including minimum wage increases.
As you know, on June 21, 2007, in response to newly enacted federal law which increases minimum wage rates every year unless we prove that our economy cannot sustain the increase, I asked ASG to provide my office with pertinent information regarding the number of its employees and salaries. I copied the Fono on this letter and, to date, I have not heard from the Fono or the Governor. However, I am pleased to learn that ASG has been cooperative with the US Department of Labor in providing Dr. Bird’s staff with the information needed for the Bureau of Labor Statistics to undertake its study as mandated by federal law.
Given that this study is required by federal law and that it is necessary in determining whether or not we will be able to end escalator clauses which now require that minimum wages be increased annually by $0.50 per hour, I am disappointed to learn that you see no need for this study. I do see a need for a study of this kind which is the first of its kind ever conducted in American Samoa and which will provide us with credible, factual information to present to Congress which ASG and our canneries have been unwilling to provide on their own accord.
Once this study is completed, I intend to present this information to Congress in an effort to get the federal support we need to put an end to escalator clauses. As I have since the inception of IRS section 936, I will also continue to push for federal tax credits for our canneries while making sure canned tuna is treated as a highly import sensitive product for as long as the US continues to negotiate free trade agreements.