Republicans Give American Samoa a Little Help in Tax Overhaul
About a year and a half ago, I wrote a long post detailing the many problems American Samoa is having. Because of its small size and remote location, the territory does not have much economic activity and poverty is a major problem there, with unemployment estimated around 30%. Economically, American Samoa is heavily dependent on the local government and two large tuna canneries for the majority of the territory’s jobs.
Prior to Hurricanes Maria and Irma devastating Puerto Rico and the US Virgin Islands, I’d have argued that American Samoa was probably in the worst shape of any US territory.
Minimum wage hikes forced on the territory by the US federal government during the last decade caused one of the canneries to shut down and caused a major unemployment crisis in the territory. These wage hikes were also responsible for collapsing the Northern Marianas’ garment manufacturing industry during this period as well.
A company called Tri Marine decided to invest in the territory and refurbished the shut down cannery, spending $70 million to upgrade it and make it operational again. Unfortunately, the territory’s woes did not end there. Tri Marine began operating the cannery in 2015, and by the end of 2016 they had to shut down because the expense of operating the tuna cannery was simply too high for them to make any money. They could not compete with neighboring low-wage islands.
American Samoa is still being used as a logistics hub by Tri Marine, but about 700 jobs were directly lost, as well as nearby restaurants closing down, bus service stopping, and other support jobs ending as well.
The territory has been very afraid the other tuna cannery run by StarKist might close down as well, which would be another devastating blow to the economy. StarKist employs about 2,000 Samoans, and a temporary shutdown of the cannery earlier in the year required a food drive to help keep the employees fed after the unexpected shutdown.
The governor of American Samoa, Lolo Matalasi Moliga, had this to say about the situation back in July:
The governor of American Samoa has predicted the departure of the StarKist tuna cannery in the next five years unless the US government intervenes.
Lolo said Washington had taken away a tax credit and terminated a tax incentive, forcing American Samoa to grant the cannery tax exemptions and preferential land leases.
He said the automatic minimum wage increase imposed by the US every three years had forced the Tri Marine cannery to terminate its operation and was deterring other investors from coming to American Samoa.
Things may be finally turning around for the beleaguered territory, however, as Trump or someone in the Republican Party has apparently noticed what is going on and moved to provide them with some relief:
While partisans squabble over whether the Republican tax overhaul in Congress benefits the middle class or the wealthy, part of the proposed legislation is going over swimmingly in Pago Pago.
The House plan, which would reinstate a tax break for a tuna cannery in American Samoa’s capital city, could provide about $10 million a year to StarKist Co., the territory’s largest private employer.
The potential extension of the American Samoa Economic Development Credit would help the tuna company’s cannery, where 2,300 workers cook, clean and pack about 5,000 containers filled with Pacific Ocean fish annually. StarKist, owned by South Korea’s Dongwon Industries, saw its targeted tax break lapse in 2016. The House bill would revive the credit and extend it through 2022.
The credit’s advocates say it is an economic imperative. American Samoa’s other large cannery closed last year, citing reduced access to fishing grounds. StarKist says it is facing competition from subsidized firms in Thailand and China that pay lower wages. On top of the steady decline in American appetite for canned tuna, the end of the tax credit could tip the scales away from Pago Pago.
“For us to stay in American Samoa, this is very critical,” said Andrew Choe, StarKist’s president and chief executive officer. “This credit does help us to stay competitive.”
The American Samoa provision is a rounding error in the U.S. shelf-stable seafood market and the tax bill, but it is an important priority for StarKist and American Samoa’s nonvoting representative, Aumua Amata Radewagen.
Ms. Amata, a Republican, asked Ways and Means Committee Chairman Kevin Brady (R., Texas), to include the credit in his tax bill. He did. A spokeswoman for Mr. Brady said this provision and others for Puerto Rico and the U.S. Virgin Islands “recognize the unique economic circumstances” of the territories.
The Pacific territories have generally been much more supportive of the Republicans and the Trump administration than the Caribbean territories. It may be that was a decisive factor in finally getting some sensible action from Washington to help the US territories after a decade of inept and misguided policy making under the Bush and Obama administrations.