Maybe Michael Brown Can Get a Job with Carnival

Here’s an example of fine corporate citizenship. In the aftermath of Katrina, FEMA, desparate to obtain housing for people displaced by the storm, got itself into a no-bid contract to pay Carnival Cruise Lines $236 million for the use of three ships. The cost is more than double what you or I might pay for a seven-day cruise — every week for six months.

To critics, the price is exorbitant. If the ships were at capacity, with 7,116 evacuees, for six months, the price per evacuee would total $1,275 a week, according to calculations by aides to Sen. Tom Coburn, R-Okla. A seven-day western Caribbean cruise out of Galveston can be had for $599 a person — and that would include entertainment and the cost of actually making the ship move.

Government negotiators defend the deal, saying Carnival only charged “market” rates.

Government contracting officials defended the deal. “They were the market,” Capt. Joe Manna, director of contracts at the [US Military] Sealift Command, said of Carnival. “Under the circumstances, I’d say we’re getting a pretty good value.”

Carnival, based in Miami, is incorporated for tax purposes in Panama to shelter its income. And shelter it does:

The Carnival deal has come under particular scrutiny. Not only are questions being raised over the contract’s cost, but congressional investigators are examining the company’s tax status. Carnival, which is based in Miami but incorporated for tax purposes in Panama, paid just $3 million in income tax benefits on $1.9 billion in pretax income last year, according to company documents.

“That’s not even a tip,” said Robert McIntyre of Citizens for Tax Justice. U.S. companies in general pay an effective income tax rate of about 25 percent, analysts say. That would have left Carnival with a $475 million tax bill.

So, let’s see. Carnival sees a chance to take advantage of a natural disaster and charges what actually appear to be well above market rates to provide temporary shelter for evacuees. Carnival, a US-based company, does everything possible to avoid paying US taxes. It’s a win-win situation for Carnival. And lose-lose for the rest of us.

5 Responses to “Maybe Michael Brown Can Get a Job with Carnival”

  1. Bill says:

    25% may be the average for all U.S. companies. A company making $1.9 billion would pay 35% on the vast majority of its pretax net income. Their taxes would be more like $650 million actually.

    Sounds like a nice deal. Is Carnival a susidiary of Halliburton?

  2. Jeff says:

    “No-bid contracts for everyone! More wine! More tax cuts!”

    Full disclosure: sorry, but the entire family is going on a Carnival cruise in Nov. (parents 50th anniversary). Disgusting, I know… I promise to not enjoy it TOO much.

  3. So nice that our government is worse at negotiating a price than anybody I know. Who pays full market rates anymore? An idiot, that’s who. Or a Bush appointee with a checking account filled with taxpayer money.

    Carnival sucks anyway. They should have gotten Royal Caribbean. At least it’s a good cruise line.

  4. wanda says:

    Business as usual I see.

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