Congressman Faleomavaega announced today that he is urging the Governor and Fono to reform local tax laws in support of federal efforts to develop a long-term policy for economic development. 

The Congressman also announced that he was informed yesterday by the Senate Committee on Energy and Natural Resources that Governor Togiola has written a letter and submitted a federal tax proposal to Senator Pete Domenici (R-NM) and Senator Jeff Bingaman (D-NM) for Congressional consideration. 

Faleomavaega was not copied on the Governor’s letter to the Senators and only learned of this yesterday when he was contacted by the Committee which forwarded Faleomavaega a copy of the Governor’s letter to the Senators as well as a draft of the Governor’s proposed federal tax bill.

In response to the Governor’s proposal, Faleomavaega has written to Governor Togiola and copied the Lieutenant Governor, the Fono, the Department of the Interior, Chicken of the Sea, StarKist, the US Tuna Foundation, the US Tuna Fishing Fleet, and the American Samoa Chamber of Commerce.  The full text of the Congressman’s letter dated December 8, 2005 is included below. 

Dear Governor Togiola:

As a follow-up to our meeting on November 23, 2005 in American Samoa in which you informed me that the Lieutenant Governor would be your point person in working with my office on developing a long-term policy to replace IRS 936, I am writing to let you know that the Lieutenant Governor and I had our first meeting on December 6, 2005 in my Washington office.  He was accompanied by Ms. Jan Lipsen, a consultant hired by ASG.  Mr. Ed Ing, a tax attorney working with ASG and Ms. Lipsen, was unable to attend the meeting.

Based on our conversation on November 23, 2005, it was my understanding that it was your intent and desire to work directly with my office on developing a long-term policy after which time we would draft legislation which would represent the interests of our canneries, boat owners and local businesses.  It was also my understanding that the Fono and the Department of the Interior (DOI) would have a voice in this process. 

Given our understanding, I was surprised when Ms. Lipsen mentioned in our meeting that a bill has already been drafted.  When I asked her to what bill she was referring, she retracted her statement.

However, the story changed a day later on December 7, 2005 when Mr. Ed Ing delivered a letter (attached) from you to Senator Pete Domenici and Senator Jeff Bingaman, Chairman and Ranking Member of the Senate Committee on Energy and Natural Resources, regarding a bill (attached) you have drafted in cooperation with Mr. Ing and Ms. Lipsen.  The letter was not copied to myself or the Lieutenant Governor or to the Fono which goes against the understanding I thought we had in place.  In fact, no one was copied on your letter.

Your letter is dated November 25, 2005 and was hand-delivered by Mr. Ing to Mr. Josh Johnson, Professional Staff to Chairman Domenici of the Senate Committee on Energy and Natural Resources, and Mr. Allen Stayman, Professional Staff to Ranking Member Bingaman.  You may wish to know that immediately upon receipt of your letter, the first question Mr. Johnson and Mr. Stayman asked Mr. Ing was whether or not I had been consulted.  Upon learning that you had not consulted with me, Mr. Johnson and Mr. Stayman directed your associates back to my office and plainly stated that the Senators will not take action on your draft proposal at this time. 

While it is very clear that you have not asked for my support and while it is your prerogative to ask any Member of the House or Senate to submit your proposal to the Joint Committee on Taxation or to aid you as you seek to pursue this matter without consultation, be informed that I cannot and will not support your efforts until such time as the canneries, the U.S. tuna boat owners, our local businesses, the Fono and the DOI have an opportunity to provide input and until such time as this matter is fairly presented to our people.

Again, more than 80% of our private sector economy is dependent either directly or indirectly on our canneries.  The U.S. tuna boat owners contribute more than $25 million annually to our local economy.  Given their importance to our economy, they must be consulted.  Equally as important, our local business owners and Fono must be consulted. 

It is also a matter of fact that the General Accounting Office (GAO) and the Joint Committee on Taxation have not completed their studies regarding the impact of U.S. federal tax policy on Puerto Rico and the insular areas which have been underway for two years.  Until these studies are completed, we are in no position to draft a bill without the benefit of these findings.  

While it is my understanding that the DOI provided you with $91,000 to undertake a study separate and apart from the work of the GAO and Joint Committee on Taxation, I am not clear if DOI supposed that its money would be used to draft a bill rather than to explore alternatives as initially agreed.  In fact, it is my understanding that the Office of Insular Affairs was unaware that a bill had been drafted and submitted to Senators Domenici and Bingaman for their assistance.  Considering that OIA is paying for your undertaking, I note with interest that as of today OIA insists it does not have a copy of your proposal and was also not copied on your letter to the Senators.  

I also note that Ms. Lipsen informed me that your efforts have been ongoing for months meaning you could have brought this matter to my attention in our November meeting.  Ms. Lipsen also could have brought this matter to my attention during our meeting with the Lieutenant Governor.  At this time, I am unclear as to whether or not the Lieutenant Governor has been apprised of your proposal.  However, since you just informed me during our November 23, 2005 meeting that you had assigned the Lieutenant Governor to work with me on a long-term policy and since he did not raise this issue in our meeting, I can only conclude that like me he was also not consulted about your plan to propose a draft bill which has just now been brought to my attention not by you or by Ms. Lipsen or Mr. Ing but by the Senate Committee on Energy and Natural Resources. 

Today, the House passed by a vote of 234 to 197 the Tax Reconciliation Act which includes a one-year extension of section 936 for our canneries.  As you know, at my request, Chairman Thomas and Ranking Member Rangel of the Ways and Means Committee also included language in the Conference Report which obligates the Committee to provide for the development of a long-term federal tax policy for American Samoa.  The language stipulates that:

The Committee understands that the tuna canning industry is the largest employer in American Samoa and is the primary beneficiary of the section 936 credit in American Samoa.  The Committee believes that the expiration of the section 936 credit would negatively impact the economy of American Samoa and that the credit therefore should be extended for an additional year to provide time for the development of a comprehensive long-term policy with respect to American Samoa.

The Committee is aware that the Government Accountability Office and the staff of the Joint Committee on Taxation are in the process of preparing reports regarding the impact of U.S. Federal tax policy on Puerto Rico, including an analysis of the tax and economic policy implications of proposed legislative options and the revenue costs of those options.  The Governor of Puerto Rico has expressed support for the extension of the section 936 credit to American Samoa while awaiting these reports concerning Puerto Rico.  Pending completion of these reports, the Committee believes it is appropriate to extend the section 936 credit to American Samoa in recognition of the conditions facing that territory.

Without this language, there would be no opportunity for you to pursue your proposal with any measure of success.  However, our work is not done.  This matter must now go to conference.  Therefore, until such time as this matter is favorably resolved, it behooves us to hold off on introducing further legislation or from submitting to anyone for any purpose a draft bill which fails to include input from all vested stakeholders.  Now is not the time to confuse Congress and now is not the time to go behind Chairman Thomas and Ranking Member Rangel and draft measures without their input.

As a reminder, let me state that the House Committee on Ways and Means and the Senate Committee on Finance have primary jurisdiction for any and all tax legislation in Congress.  The Senate Committee on Energy and Natural Resources to which you have directed your letter and proposal can only support but not pass tax legislation.  Also, the Joint Committee on Taxation will not score a proposal as you have requested.  The Joint Committee on Taxation will only score a formal bill submitted by a Member of the House or Senate.

This aside, I would like to take this opportunity to once more say that if ASG is sincere about economic development then it must get serious about local tax policy.  While the federal government is now committed to developing a long-term tax policy to benefit our workers and our corporate community, I cannot emphasize enough the need for your office and our Fono to now propose and enact tax reform legislation for our local government.  For example, I believe 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 now 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.

The Congressman ended his letter by saying, “In conclusion and, as always, I remain available to work with you.  However, our people deserve nothing less than for our work together to be done in the light of day.”