January 30, 2013 at 5:54 p.m.
Will Obama be gentle with us?
We must do all we can to ensure that his tax push does not trigger the collapse of BDA’s business model
On the Tuesday, as a black man, I'll celebrate. The next day, as a Bermudian, I'll be at war. Here's what the war is about.
Effectively, American International [AIG] now belongs to U.S. taxpayers. The terms and conditions of September's initial $85 billion loan of Federal funds to AIG meant that U.S. taxpayers became the effective owner or controller of about 80 per cent of AIG. The $43 billion-plus since added means that AIG is now almost wholly owned by U.S. taxpayers.
The terms require AIG to sell off some of its components, reorganize itself, and thus return to some semblance of profitability. Originally, AIG had two years, but hard-kicking reality forced the Feds to extend to five years.
Between September and December 2008, about 1.9 million more ordinary American taxpayers - showed up as newly unemployed. These taxpayers, business owners as well as workers, lost their companies and their jobs. By year-end 2008, there were about 11,100,000 jobless Americans needing help and support. Support can only come from other still-working American taxpayers - either out of taxed current earnings or borrowed against yet-to-be-taxed future earnings.
Back to AIG. One of AIG's profit creating mechanisms was to base some of its operations outside the territorial U.S. - thus beyond the reach of the IRS. AIG based some operations in Bermuda. This meant that AIG avoided some U.S. corporate taxes. In addition, AIG provided offshore jobs for non-Americans. All this in the good times when CEO 'Hank' Greenberg ran privately owned AIG.
Times and the economy have changed. Now U.S. taxpayers own AIG. These hard-pressed U.S. taxpayers won't want to see U.S. companies avoiding US taxes. U.S. taxpayers who are losing their jobs by the hundreds of thousands won't want to see jobs that can be done in America, by Americans, going or remaining offshore while jobless Americans scrape and scratch.
Enter newly installed President Barack Obama.
He has promised to deal with U.S. corporations that 'avoid' paying U.S. taxes, and provide up to $800 billion in order to help restart the U.S. economy and get Americans 'back to work'. Once in the Oval Office, he becomes responsible for looking after the interests of all Americans.
Bermuda is not the 51st State. Bermudians are not Americans. As black as some of us are, we are still not the kind of people for whom President Obama is specifically responsible.
On January 21, 2009, President Obama will see an American company effectively owned by the U.S. government; operating in a tax-reduced non-American environment; not paying all that it reasonably can into the U.S. Treasury; and not employing American workers.
Target: Bermuda
On pure national political principle, ignoring all arguments from analysts and accountants, President Obama's people must shut down AIG's Bermuda operation, repatriate jobs to the U.S. mainland, and pay desperately needed taxes into the U.S. Treasury.
Starting January 21, like the light from a rising sun, the eyes of the new Obama-led U.S. government will start shining on Bermuda. Slowly, inexorably, their eyes will alight on AIG, its modus operandi, and its Bermuda connection. Subsequently, Obama's people will dismantle AIG (Bermuda), bag it, box it, and take their haul of jobs and taxes off towards the setting sun.
AIG has strong local connections. At one time 'Hank' G had AIG, Jeffrey G had Marsh & McLennan, and Evan G had ACE. Due to now-disgraced Eliot Spitzer, Hank and Jeffrey are off the scene. However, the business connections remain. Without AIG, Bermuda retains a critical mass in the Re-Insurance business. Bermuda must do all that it can to make sure that this single Obama act does not trigger the collapse of Bermuda's existing business model.
However, in past months, voices from Bermuda's Bermudian community have been sending a message that some Bermudians are 'fed-up' with International Business.
Barack Obama has been sending a loud, clear, continuous message since early 2008. On December 31, 2008, I specifically asked what 'message' would Bermuda send to its local business community and to foreign companies that may be thinking about locating here.
I have heard Obama's message. I have not heard a Bermuda message that is as clear and consistent as Obama's. This also means that other people have not heard.
Consider this: By the end of 2008, the U.S. government was reporting 11.1 million unemployed Americans (Jan. '09), with 2.6 million newly unemployed. Bermuda government reports 27,272 Bermudians filling jobs (Aug. '08). For every one Bermudian who is in a job, there are now more than 400 unemployed Americans.
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