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Mr. ABBOTT. Senator Hodge.
Do you want to speak at this point, Mr. Sherfy?
Mr. SHERFY. Yes.

Mr. ABBOTT. My thought was, Dr. Miller, after they made their comments then Mr. Sherfy would make his statement.

Mr. SHERFY. I would like to talk on this point Dr. Miller raised and also this gentleman here [indicating Mr. Young] raised.

Mr. O'BRIEN. If you will, Mr. Sherfy.

Mr. SHERFY. There is no doubt that the definition of a permanent inhabitant of the Virgin Islands is subject to determination on the facts and circumstances of each case. What is a permanent inhabitant of the Virgin Islands? I would not be able to answer.

I do not know whether you are aware of the fact that there is in the law today with respect to citizens residing abroad an exemption for earned income of bona fide residents abroad.

Over the years numerous court decisions have been handed down on "bona fide residents," and I would think that the definition of "permanent inhabitant" in relation to an individual, would involve the same type of reasoning as bona fide residents.

Now, the possibility, therefore, exists that certain persons would believe that they are permanent inhabitants of the Virgin Islands and pay their taxes to the Virgin Islands, and the Internal Revenue Service will not so agree under the Federal law; and the taxpayer may find himself possibly paying a tax to the Internal Revenue Service and also to the Virgin Islands and having to come back to them.

I think that is what you are raising, Mr. Young.
Mr. YOUNG. Yes.

Mr. SHERFY. Secondly, there was suggested the 6 months and 1 day possibility.

I merely would like to put in the record that under the Internal Revenue Code prior to 1942 we had a principle of bona fide nonresidents for 6 months. Individuals going abroad were exempted on their income earned outside the United States if they were abroad as bona fide nonresidents of the United States for more than 6 months. People went on ships for slightly over 6 months, such as crewmen on ships, or went across to Canada and stayed for 6 months and earned income. In other words, the problem is a difficult one. Time limits

Time limits may make it easier for avoidance in some cases, and no exact definition in some cases makes it difficult for a person to know whether he or she is under the law.

(Discussion off the record.)

Dr. MILLER. Mr. Chairman, we have 19 minutes to discuss a very important subject. I am wondering how much more time you want to put on this tax situation. I think we understand pretty well just what the problem is and how it should be attacked.

Mr. O'BRIEN. May I ask as this point if we are in general agreement that the legislature at its coming session should attempt to rewrite the law, as much as rewriting may be necessary, with the understanding that, if nothing is done or if what is done is not adequate, then Congress may be compelled to step in and do some writing of its own! Is that the general understanding?

Mr. MERWIN. Yes.
Mr. LAWAETZ. Yes.

Mr. O'BRIEN. I do not think we can get beyond that by prolonging this particular discussion.

Mr. HODGE. Mr. Chairman, I am in agreement with that because I think the question is entirely that it should be handled locally rather than handled by the Congress.

However, in the section concerning Federal income tax and (ii) funds and matching funds, I would like to comment briefly on that.

I would say that we should have one alternative, and that is that (ii) funds should be continued indefinitely, very indefinitely, until such time as we are able to suport ourselves and until such time as we have all our roads and public projects in shape.

I say we should be able to do that maybe in 5 of 10 years, but I think that the funds should be continued indefinitely until we are able to get the major things done in the islands.

Dr. MILLER. What do you understand by (ii) funds?
Mr. HODGE. Those are the funds that lasted for 2 years, Dr. Miller.
Dr. MILLER. Where do they come from?
Mr. HODGE. They come out of your Federal Treasury.
Dr. MILLER. There is no contribution by the islands at all?
Mr. HODGE. On the internal revenue basis for 2 years.

Dr. MILLER. Do they come out of your internal revenue funds that you pay?

Mr. HODGE. Yes.

Dr. MILLER. Aren't they a subsidy from the United States Government?

Mr. HODGE. Which are collected from the taxpayer in the United States.

Dr. MILLER. The taxpayers of the United States furnish all the moneys to the (ii) funds?

Mr. HODGE. Yes, sir.

Dr. MILLER. Do not hold out too much hope they will be continued indefinitely, because I am quite sure there is a revolt among the taxpayers of the United States as to how long that type of fund should be handed out to any group anyplace.

Mr. HODGE. Would you like to hear my alternative to that, sir.
Dr. MILLER. Yes.

Mr. HODGE. I would like us to be placed outside of the scope of the Federal income-tax laws and we be granted internal revenue fully like Puerto Rico.

Mr. O'BRIEN. I think at this state—in fact, I know-that we must move into our final subject, which is the question of an elective governor.

Mr. ABBOTT. Mr. Chairman, before we go into that, may I leave with you, Senator Hodge, as president of the legislature, a copy of H. R. 11665 and the report of the Department of the Interior, dated June 5, 1956, and entrust to your office the responsibility for reproducing this in sufficient numbers so that interested individuals here can examine it? It at least forms a partial background for a framework against which you can consider this tax question. If that is agreeable with you, Senator.

Mr. HopGE. Yes.

Mr. O'BRIEN. This final word, and I would like to make this as urgent as possible: On this particular matter, I think that all of you-

you are all interested in the Virgin Islands—whatever differences you may have on any other subject, this is one I think you should sit down, as men who belong to no party, who have had no differences, and try to work this out.

Mr. HODGE. I know that.

Mr. O'BRIEN. In other words, as Mr. Merwin said, you put us on the spot, and we do not intend to remain on that spot beyond 1957.

Mr. HODGE. I can assure you attempts will be made by the legislature to comply with your wishes.

Mr. Rohlson. Before you move on, I would like to go on record with respect to my comment on the (ii) funds, if I may.

Mr. ASPINALL. Mr. Chairman, may we permit Mr. Rohlson to send us a statement?

Mr. O'BRIEN. Would you do that? Because we are really up against a situation where within 15 minutes we will have to stop.

Mr. ASPINALL. I ask unanimous consent his statement be put in the record of the hearing.

Mr. Rohlson. I was only going to take 2 minutes to say I favor retention of the (ii) funds, that is, a 10-year extension.

Mr. O'BRIEN. Thank you.

Mr. ABBOTT. It should be pointed out, Mr. Chairman, that any individual who wishes to comment on this section, as is true throughout the bill—and I repeat what has been said earlier-may submit within 15 days after the conclusion of this record here today their comments.

I might also add that the impression should not have been left, as our members themselves have stated, that there should be any hesitancy about recommending any kind of a bold program striking out in a completely new area for those things which would point toward self-sufficiency of the Virgin Islands consistent with sound governmental relations.

So you are not confined, as I understand it. And the members, I am sure, will correct me. Puerto Rico struck out on a bold

program and came up with one. If you gentlemen examine Puerto Rico thoroughly, I am convinced you do not want it in the pure Puerto Rico form, for the simple reason theirs relies on internal generation of income in the main.

In any case, the impression should not have been left--and it may not have been—that there is any limitation on your own imagination and sound judgment as to what can be done.

Mr. O'BRIEN. Washington does occasionally accept a new idea.

Mr. ABBOTT. On section 28 (b), we have only had part of the comments. If there are those who should wish to comment further, do so in writing; also on 28 (c).

Section 28 (d), duty on the Virgin Islands exports, we are told by some is a poor substitute for section 36 of the 1936 act, which definitely related the customs duty to the existing organic act.

(Subsequently Mr. Joseph submitted the following statement:)

SECTION 28. Disposition of internal revenue collections: All moneys collected by means of internal revenue by the United States Government on articles produced in the Virgin Islands and exported to the United States should be returned to the Virgin Islands and made available for expenditure as the Legislature of the Virgin Islands may provide. The guardianship of the treasury regarding unwarranted expenditures should rest with the Governor. While we have had : reign of some spendthrifts in our legislature for a period of some 4 years or so out of 20 years in passing moneys for certain projects considered direct Presi. dential guardianship. Any excessive expenditures during such time must be blamed on our Governor. He had the veto power and he had the right to use it. It must be because of his (the Governor's) inefficiency that moneys were not spent for more essential projects. The fact is that while the Governor's vetoes may be overridden by the legislature, the measure must be sent to the President. Certainly the President of the United States must approve of any measure before it becomes law that was vetoed by the Governor of the Virgin Islands. If the Governor at that time and during such reign used his veto power wisely, the Virgin Islands Legislature of that period would not be credited with unwarranted spending. Since it is based on that particular period that the United States Government saw it fitting to curtail our rights as citizens of the United States as other citizens, they should restore those rights to us, as the people are not to be blamed through their legislators, but the Governor.

SECTIONS 29 THROUGH 36

MISCELLANEOUS PROVISIONS

SEC. 29. All officials of the government of the Virgin Islands shall be citizens of the United States. Every member of the Legislature of the Virgin Islands and all officers and employees of the government of the Virgin Islands shall before entering upon the duties of their respective offices, or, in the case of persons in the employ of the government of the Virgin Islands on the effective date of this Act, then within sixty days of the effective date thereof, make a written statement in the following form : “I,

do solemnly swear (or affirm) that I will support, obey, and defend the Constitution and laws of the United States applicable to the Virgin Islands and the laws of the Virgin Islands, and that I will discharge the duties of

with fidelity. “And I do further swear (or affirm) that I do not advocate, nor am I knowingly a member of any organization that advocates the overthrow of the Government of the United States or of the Virgin Islands by force or violence or other unconstitutional means, or seeking by force or violence to deny other persons their rights under the Constitution and laws of the United States applicable to the Virgin Islands or the laws of the Virgin Islands.

"And I do further swear (or affirm) that I will not so advocate nor will I knowingly become a member of such organization during the period that I am an employee of the Virgin Islands."

SEC. 30. All reports required by law to be made by the Governor to any official of the United States shall hereafter be made to the Secretary of the Interior, and the President is hereby authorized to place all matters pertaining to the government of the Virgin Islands under the jurisdiction of the Secretary of the Interior except matters relating to the judicial branch of said government which on the date of approval of this Act are under the supervision of the Director of the Administrative Office of the United States Courts, and the matters relating to the United States attorney and the United States marshal which on the date of approval of this Act are under the supervision of the Attorney General.

SEC. 31. (a) The Secretary of the Interior shall be autorized to lease or to sell upon such terms as he may deem advantageous to the Government of the United States any property of the United States under his administrative supervision in the Virgin Islands not needed for public purposes.

(b) The government of the Virgin Islands shall continue to have control over all public property that is under its control on the date of approval of this Act.

SEC. 32. Section 6 of the Act of August 30, 1890 (26 Stat. 414, 416), as amended (21 U. S. C., 1946 edition, sec. 104) is further amended by inserting the words “and the admssion into the Virgin Islands” immediately following the word “Texas”, so that such section will read as follows:

“The importation of cattle, sheep, and other ruminants, and swine, which aru diseased or infected with any disease, or which shall have been exposed to such infection within sixty days next before their exportation, is prohibited : Provided, That the Secretary of Agriculture, within his discretion and under such regulations as he may prescribe, is authorized to permit the admission from Mexico into the State of Texas and the admission into the Virgin Islands of cattle which have been infested with or exposed to ticks upon being freed therefrom. Any person who shall knowingly violate the foregoing provision shall be deemed guilty of a misdemeanor and shall, on conviction, be punished by a fine not exceeding $5,000, or by imprisonment not exceeding three years, and any vessel or vehicle used in such unlawful importation within the knowledge of the master or owner of such vessel or vehicle that such importation is diseased or has been exposed to infection as herein described, shall be forfeited to the United States."

Sec. 33. Section 2 of the Act of February 2, 1903 (32 Stat. 791, 792), as amended (21 U. S. C., 1946 edition, sec. 111), is hereby further amended by striking out the period and adding at the end thereof the following: “: Provided, That no such regulations or measures shall pertain to the introduction of live poultry into the Virgin Islands of the United States.".

Sec. 34. This Act shall take effect upon its approval, but until its provisions shall severally become operative as herein provided, the corresponding legislative, executive, and judicial functions of the existing government shall continue to be exercised as now provided by law or ordinance, and the incumbents of all offices under the government of the Virgin Islands shall continue in office until their successors are appointed and have qualified unless sooner removed by competent authority. The enactment of this Act shall not affect the term of office of the judge of the District Court of the Virgin Islands in office on the date of its enactment.

SEC. 35. There are hereby authorized to be appropriated annually by the Congress of the United States such sums as may be necessary and appropriate to carry out the provisions and purposes of this Act.

SEC. 36. If any clause, sentence, paragraph, or part of this Act, or the application thereof to any person, or circumstances, is held invalid, the application thereof to other persons, or circumstances, and the remainder of the Act, shall not be affected thereby.

Mr. ABBOTT. On the miscellaneous provisions in sections 29, 30, 31, 32, 33, 34, 35, and 36, to our knowledge no questions have been raised.

There is a phantom section which should have been 37, the general repealer section. Members are aware it was lost someplace in the bowels of the United States Capitol between the Senate House conference committee adjourning and the printing which came out on the House floor and the Senate floor. So it does happen in Washington, gentlemen.

Dr. MILLER. But it is still there, I might say. It can be repealed.

Mr. ABBOTT. The other things that had been laid aside, the question of an elective governor, resident commissioner in Washington or delegate in Washington.

Senator Merwin. Mr. AsPINALL. Mr. Chairman, may I interrupt at this point? Mr. O'BRIEN. Mr. Aspinall. Mr. ASPINALL. A year ago when the subcommittee was here on some of these matters there were statements made that these islands had not kept pace with other islands in the Caribbean and in their quest for autonomy and self-government.

Several questions were propounded by me, as chairman of that committee, to the Library of Congress for answer, and under date of February 3, 1956, they stated their answers. I have reason to believe they were authoritatively answered.

I would ask unanimous consent that the letter which I addressed to the Library of Congress for the committee and the answers of February 3, 1956, from the Library of Congress be made a part of the record at this point, and that the chairman of this subcommittee be requested to ask the Library of Congress if any additional information relative to this matter has been received by them since February 3, 1956.

Mr. O'Brien. Without objection, it is so ordered. I think it is an excellent idea.

Dr. MILLER. Let me say, Mr. Chairman, I have examined the questions and the answers, and I think they are quite pertinent to this

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