[News] Taxing Puerto Rico to death

[Anti-Imperialist News]

http://www.orlandosentinel.com/opinion/os-ed-taxing-puerto-rico-to-death-20180110-story.html 



  Taxing Puerto Rico to death

Nelson A. Denis - January 10, 2018
------------------------------------------------------------------------

There is a national misperception of taxpayers in Puerto Rico: that they 
pay less than their fair share, and are leeching off the mainland 
economy. Yet the exact opposite is true. Puerto Ricans on the island are 
the most heavily taxed of all U.S. citizens.

Puerto Ricans pay Social Security, Medicare 
<https://www.irs.gov/taxtopics/tc903> and other payroll taxes 
<http://www.payrollpuertorico.com/> – but unless they are federal 
employees, they do not pay federal income taxes 
<https://www.irs.gov/taxtopics/tc901>. With an island per capita income 
of $11,688 <https://www.census.gov/quickfacts/PR>, a single filer using 
the standard 2017 deduction 
<https://www.forbes.com/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#207a994b5701> 
would owe only $534. This Puerto Rican “tax preference” of $534 is 
offset by all of the following:

For the past 98 years, the Jones Act 
<https://www.nytimes.com/2017/09/25/opinion/hurricane-puerto-rico-jones-act.html> 
has raised the price of all goods in Puerto Rico by 15 percent to 20 
percent, to the point where the same car costs $6,000 more in San Juan 
<https://www.wsj.com/articles/aloha-puerto-rico-1465163389> than it does 
in Miami. Economists have estimated the island-wide consumer cost of the 
Jones Act to be $1.7 billion 
<http://docplayer.net/494027-Economic-impact-of-jones-act-on-puerto-rico-s-economy.html> 
per year. With an island population of roughly *3.4 million 
<https://qz.com/1122679/puerto-rico-news-100000-have-left-the-island-after-hurricane-maria/>*, 
the Jones Act is thus a /de facto/ tax of $500 on every person in Puerto 
Rico. The Jones Act alone, virtually wipes out the $534 “income tax 
preference” in Puerto Rico. But here is what Puerto Ricans 
/additionally/ face:

 From 2013 to 2014, 105 different taxes 
<https://panampost.com/belen-marty/2015/01/19/running-on-empty-puerto-rico-ups-gas-tax-amid-falling-oil-prices/> 
were raised in Puerto Rico.

Over a 19-year period, from 1990 to 2009, Puerto Rico paid more federal 
taxes 
<https://www.puertoricoreport.com/puerto-rico-paid-federal-taxes-six-states/#.Wkx-SlWnGM8> 
than six U.S. states.

Puerto Ricans on the island are the most heavily taxed of all U.S. 
citizens.

 From 2011 to 2016, the island government raised the sales tax 
<https://www.forbes.com/sites/scottbeyer/2015/08/17/puerto-rico-at-11-5-has-americas-highest-sales-tax/#24cb24f4308f> 
to 11.5 percent, hiked the water rates 
<https://www.nytimes.com/2014/02/09/us/economy-and-crime-spur-new-puerto-rican-exodus.html?_r=2> 
by 60 percent, raised local corporate tax 
<https://www.nytimes.com/2014/02/09/us/economy-and-crime-spur-new-puerto-rican-exodus.html?_r=0%20> 
rates to 39 percent, raised the gasoline 
<https://panampost.com/panam-staff/2015/03/17/puerto-rico-stakes-economic-recovery-on-gas-tax-hike/> 
tax, and electricity rates 
<https://www.theguardian.com/world/2015/jul/12/puerto-rico-cost-of-living> 
skyrocketed. In fact, Puerto Ricans pay nearly three times as much 
<https://www.theguardian.com/world/2015/jul/12/puerto-rico-cost-of-living> 
(300 percent) for their electricity than we do in the mainland. Food 
costs twice as much 
<https://palmer.house.gov/media-center/press-releases/forward-thinking-solution-puerto-rico> 
in Puerto Rico as in Florida. This too, is a /de facto/ tax.

And then, in 2017, the U.S. Congress dealt the /coup de //gr//â//ce/: a 
12.5 percent tax 
<http://money.cnn.com/2017/12/19/news/economy/us-tax-overhaul-wto-trade-europe/index.html> 
on all goods exported from Puerto Rico through a U.S. corporation. 
Embedded in the GOP tax plan, the economic havoc of this 12.5 percent 
export tax will be swift, severe and will engulf the entire island 
<http://www.miamiherald.com/news/nation-world/world/americas/article187413268.html>. 
Pharmaceutical companies are currently the largest private employer on 
the island. They generate roughly 90,000 jobs 
<http://money.cnn.com/2017/09/29/news/companies/puerto-rico-drug-makers/index.html>, 
provide over half the manufacturing 
<https://aldia.microjuris.com/2012/11/16/la-industria-farmaceutica-domina-la-manufactura-en-puerto-rico/>, 
and supply an estimated 30 
<https://www.bloomberg.com/news/articles/2017-12-05/puerto-rico-warns-tax-reform-could-slash-revenue-by-one-third> 
percent of the island’s tax revenue. But this 12.5 percent export tax 
will force the pharmaceuticals 
<https://theintercept.com/2017/12/13/gop-tax-plan-could-devastate-puerto-ricos-manufacturing-sector-with-one-line/> 
and medical manufacturers 
<https://www.npr.org/sections/health-shots/2017/11/27/566771228/puerto-ricos-medical-manufacturers-worry-federal-tax-plan-could-kill-storm-recov> 
to leave Puerto Rico, and seek a more hospitable tax climate.

A 12.5 percent tax on all of Puerto Rico’s crops, if sold through a U.S. 
corporation, will doom them in the U.S. market. In addition, this tax 
arrives after hurricanes Irma and Maria wiped out 80 percent 
<https://www.huffingtonpost.com/entry/puerto-rico-farmers-road-to-recovery-post-hurricane-maria_us_5a0f4bd9e4b0e97dffed381d> 
of the island’s crop value, killed over 2 million chickens 
<https://www.usatoday.com/story/news/world/2017/10/07/puerto-ricos-farmers-face-near-total-loss-hurricane-maria/736372001/>, 
and killed or severely affected 4,200 cows 
<https://www.huffingtonpost.com/entry/puerto-rico-farmers-road-to-recovery-post-hurricane-maria_us_5a0f4bd9e4b0e97dffed381d>.

Entrepreneurial efforts 
<https://www.nbcnews.com/news/latino/pre-accelerator-offers-way-help-puerto-rico-based-young-entrepreneurs-n823561>, 
nascent industries 
<https://www.forbes.com/sites/meimeifox/2017/12/01/meet-the-expeditionary-entrepreneur-helping-puerto-rico-recover-by-rebuilding-small-business/#c47de727e08d>, 
technology start-ups 
<https://techcrunch.com/2017/01/15/puerto-rico-turns-to-tech-and-entrepreneurialism-to-revitalize-the-economy/> 
and alternative energy exports 
<https://theconversation.com/for-many-in-puerto-rico-energy-dominance-is-just-a-new-name-for-us-colonialism-80243> 
will also be relegated to second-tier status in the U.S. market, by this 
export tax. All the best intentions, and all the “small business 
incubators 
<https://www.nbcnews.com/news/latino/puerto-rico-parallel-18-entrepreneurship-program-sees-results-n787186>” 
in the world, will come to nothing when their end product has a 12.5 
percent albatross strapped around their necks. This programmed failure 
will, of course, be blamed on the Puerto Ricans themselves.

All across the island, a downward spiral 
<https://www.washingtonpost.com/business/economy/shrinking-shrinking-shrinking-puerto-rico-faces-a-demographic-disaster/2017/10/17/21141334-aac2-11e7-850e-2bdd1236be5d_story.html?utm_term=.7ed2b4ecf3fd> 
will set in: with shrinking markets, dwindling access to capital 
<https://www.reuters.com/article/us-munis-puertorico/sp-downgrades-puerto-rico-debt-to-junk-status-idUSBREA131M720140204> 
and an eroding tax base 
<https://www.washingtonpost.com/business/economy/shrinking-shrinking-shrinking-puerto-rico-faces-a-demographic-disaster/2017/10/17/21141334-aac2-11e7-850e-2bdd1236be5d_story.html?utm_term=.7ed2b4ecf3fd> 
creating an inevitable shutdown 
<http://www.businessinsider.com/puerto-rico-devastation-hits-already-tattered-island-economy-2017-9>. 
Businesses will become fatally cannibalistic: selling only to each 
other, on an island with an 11.5 percent sales tax and a per capita 
income of $11,688 – roughly half that of Mississippi 
<https://www.census.gov/quickfacts/MS>, the poorest state in the U.S.

For all these reasons the governor of Puerto Rico 
<https://www.bostonglobe.com/metro/2017/12/12/puerto-rican-governor-denounces-tax-bill-devastating-island-recovery/55TrH5UnCjlGknl8KmuZQL/story.html>, 
the mayor of San Juan 
<http://thehill.com/policy/finance/362309-san-juan-mayor-gop-tax-bill-would-be-more-devastating-to-puerto-ricos-economy>, 
Democratic Sen. Bill Nelson 
<http://www.tampabay.com/florida-politics/buzz/2017/11/30/tax-bill-would-send-another-hurricane-to-puerto-rico-says-bill-nelson/> 
of Florida and many 
<http://www.miamiherald.com/news/nation-world/world/americas/article187413268.html> 
others 
<https://www.thedailybeast.com/gops-tax-bill-would-be-worse-for-puerto-ricos-economy-than-hurricane-maria> 
have declared that the GOP tax plan will wreck what little is left of 
Puerto Rico’s economy – as badly, or even worse 
<https://www.washingtonpost.com/news/posteverything/wp/2017/12/20/how-the-gop-tax-bill-will-wreck-whats-left-of-puerto-ricos-economy/?utm_term=.f8c2f0c57f30>, 
than Hurricane Maria.

It doesn’t have to be this way. Congress could act consistently 
<http://www.orlandosentinel.com/opinion/os-ed-tax-bill-pushes-puerto-rico-into-economic-depression-20171221-story.html>, 
treat Puerto Rico as a U.S. territory, and exempt it from this lethal 
12.5 percent export tax. It could also exempt Puerto Rico from the Jones 
Act, just like it did with the U.S. Virgin Islands 
<http://www.globaltrademag.com/global-trade-daily/news/legislation-would-exempt-puerto-rico-from-the-jones-act>. 
Congress should work toward a fundamental rebirth 
<https://www.linkedin.com/pulse/20141028132251-164160252-puerto-rico-manufacturing-positioned-for-a-renaissance/> 
of Puerto Rico's economy, rather than embalm it as a tax haven for the 
well-connected 
<https://www.marketwatch.com/story/puerto-rico-woos-rich-with-hefty-tax-breaks-2014-04-22> 
and captive market for U.S. consumer products 
<http://periodismoinvestigativo.com/2014/05/puerto-rico-first-in-the-world-with-walgreens-and-walmart-per-square-mile/>.

Members of Congress better do it quickly. As of this moment, Puerto Rico 
is projected to have the worst economy on the entire planet 
<https://qz.com/1137351/hurricane-marias-impact-on-puerto-ricos-economy-and-jobs/> 
in 2018.

/Nelson A. Denis, a former New York State assemblyman, is the author of 
“War Against All Puerto Ricans: Revolution and Terror in America’s 
Colony 
<https://www.amazon.com/War-Against-All-Puerto-Ricans/dp/1568585616>.”/

-- 
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