Trump wants to bail out an industry that doesn't pay US taxes

The cruise ship industry is almost entirely made up of companies that are based in foreign countries and avoid paying U.S. taxes. But Donald Trump has repeatedly vowed to bail out the industry after much of its revenue evaporated due to the COVID-19 pandemic.

At Sunday’s coronavirus briefing, Trump said the nation needed to set aside money to help save businesses.

“Look at the cruise lines. That’s a big — that’s a tremendous business, a big business. Very important to Florida,” he said. “We can’t let the cruise lines go out of business. … And it doesn’t take much to keep them going. So we have to — we have to provide for that.”

He reiterated the call at Monday’s press conference, calling cruise lines an industry that has to be helped.

Trump has been saying this for weeks. “As far as the cruise line business, we’re with them all the way,” he said on March 13. “It’s a great business. It’s a great U.S. business, frankly. And I know how important they are to the country. That includes airlines. But the cruise line business, obviously, was hit very hard.”

Trump has also praised Carnival Corporation chairman Micky Arison for offering to make his company’s cruise ships available as temporary medical facilities.

Not everyone agrees with Trump’s glowing assessments.

The Boston Globe editorial board, opposing any bailout for the industry, noted last week that cruise companies typically register their ships offshore, “in places like Bermuda or Panama to skirt US taxes and labor laws.”

“There is one, count them, one, US-flagged cruise ship out of about 300 total,” the paper wrote.

A 2011 New York Times story noted that, while Carnival Corporation’s executives are based in Miami, the company was technically incorporated in Central America.

“Over the last five years, the company has paid total corporate taxes — federal, state, local and foreign — equal to only 1.1 percent of its cumulative $11.3 billion in profits. Thanks to an obscure loophole in the tax code, Carnival can legally avoid most taxes,” the Times explained. “Carnival pays so little tax partly because of a provision that lets some shipping companies legally incorporated overseas (Panama, in Carnival’s case) avoid taxes.”

Maritime attorney Jim Walker said in an email recently that “bailing out the foreign-flagged cruise industry” would be “foolish and ill-conceived” and would only reward “uber-rich cruise executives and tycoons.”

“If Trump is going to give the cruise executives a bailout, he should condition the payment of the money on certain conditions, such as requiring the industry to incorporate [and] register their ships in the U.S., requiring cruise lines to comply with U.S. labor and wage laws” and other worker protections, he said.

Such conditions would hardly be unprecedented. During the 2008 economic meltdown, Congress passed the Troubled Asset Relief Program to stabilize the nation’s financial institutions. In addition to providing equity to the U.S. government in exchange for the funds, the law included limits on executive compensation and disclosure and transparency requirements.

Maritime lawyer Michael A. Winkleman agreed that any bailout should come with conditions.

“I think it would be a mistake without having the cruise lines make some major concessions, such as abolishing the Death on the High Seas Act,” he said, citing a federal law that limits the damages cruise lines must pay when passengers and crew members die on their ships.

The government should also mandate the industry end “the forced arbitration of crew members’ claims,” he said.

Congress is currently trying to negotiate a massive relief bill to assist American businesses and individuals reeling from the coronavirus pandemic. Sen. Elizabeth Warren (D-MA) has proposed that any corporate bailout funds be conditioned on worker protections and other requirements.

On Tuesday, congressional leaders announced they had reached a $2 trillion stimulus deal that included some relief for individuals, small businesses, and a $500 billion lending fund for corporations. The Senate is expected to vote on the package later Wednesday, and the House is likely to pass it later, though the timing on the latter vote is still uncertain.

Published with permission of The American Independent Foundation.