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href="http://www.orlandosentinel.com/opinion/os-ed-taxing-puerto-rico-to-death-20180110-story.html">http://www.orlandosentinel.com/opinion/os-ed-taxing-puerto-rico-to-death-20180110-story.html</a></font>
<h1 id="reader-title">Taxing Puerto Rico to death</h1>
<div id="reader-credits" class="credits">Nelson A. Denis -
January 10, 2018<br>
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<p>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.</p>
<p>Puerto Ricans pay <a
href="https://www.irs.gov/taxtopics/tc903"
target="_blank">Social Security, Medicare</a> and
other <a href="http://www.payrollpuertorico.com/"
target="_blank">payroll taxes</a> – but unless they
are federal employees, they <a
href="https://www.irs.gov/taxtopics/tc901"
target="_blank">do not pay federal income taxes</a>.
With an island per capita income of <a
href="https://www.census.gov/quickfacts/PR"
target="_blank">$11,688</a>, a single filer using the
<a
href="https://www.forbes.com/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#207a994b5701"
target="_blank">standard 2017 deduction</a> would owe
only $534. This Puerto Rican “tax preference” of $534 is
offset by all of the following:</p>
<p>For the past 98 years, the <a
href="https://www.nytimes.com/2017/09/25/opinion/hurricane-puerto-rico-jones-act.html"
target="_blank">Jones Act</a> has raised the price of
all goods in Puerto Rico by 15 percent to 20 percent, to
the point where the same car costs <a
href="https://www.wsj.com/articles/aloha-puerto-rico-1465163389"
target="_blank">$6,000 more in San Juan</a> than it
does in Miami. Economists have estimated the island-wide
consumer cost of the Jones Act to be <a
href="http://docplayer.net/494027-Economic-impact-of-jones-act-on-puerto-rico-s-economy.html"
target="_blank">$1.7 billion</a> per year. With an
island population of roughly <strong><a
href="https://qz.com/1122679/puerto-rico-news-100000-have-left-the-island-after-hurricane-maria/"
target="_blank">3.4 million</a></strong>, the Jones
Act is thus a <em>de facto</em> 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 <em>additionally</em>
face:</p>
<p>From 2013 to 2014, <a
href="https://panampost.com/belen-marty/2015/01/19/running-on-empty-puerto-rico-ups-gas-tax-amid-falling-oil-prices/"
target="_blank">105 different taxes</a> were raised in
Puerto Rico.</p>
<p>Over a 19-year period, from 1990 to 2009, Puerto Rico <a
href="https://www.puertoricoreport.com/puerto-rico-paid-federal-taxes-six-states/#.Wkx-SlWnGM8"
target="_blank">paid more federal taxes</a> than six
U.S. states.</p>
<aside class="trb_em" data-content-id="95634556"
data-content-size="large" data-content-type="pullquote"
data-content-slug="os-1515625808-vz2h0bzmru-snap-quote"
data-content-subtype="pullquote" data-role="sc_item"
data-state=""> <span class="trb_em_pq_t">Puerto Ricans
on the island are the most heavily taxed of all U.S.
citizens.</span> </aside>
<p>From 2011 to 2016, the island government raised the <a
href="https://www.forbes.com/sites/scottbeyer/2015/08/17/puerto-rico-at-11-5-has-americas-highest-sales-tax/#24cb24f4308f"
target="_blank">sales tax</a> to 11.5 percent, <a
href="https://www.nytimes.com/2014/02/09/us/economy-and-crime-spur-new-puerto-rican-exodus.html?_r=2"
target="_blank">hiked the water rates</a> by 60
percent, raised <a
href="https://www.nytimes.com/2014/02/09/us/economy-and-crime-spur-new-puerto-rican-exodus.html?_r=0%20"
target="_blank">local corporate tax</a> rates to 39
percent, raised the <a
href="https://panampost.com/panam-staff/2015/03/17/puerto-rico-stakes-economic-recovery-on-gas-tax-hike/"
target="_blank">gasoline</a> tax, and <a
href="https://www.theguardian.com/world/2015/jul/12/puerto-rico-cost-of-living"
target="_blank">electricity rates</a> skyrocketed. In
fact, Puerto Ricans pay nearly <a
href="https://www.theguardian.com/world/2015/jul/12/puerto-rico-cost-of-living"
target="_blank">three times as much</a> (300 percent)
for their electricity than we do in the mainland. <a
href="https://palmer.house.gov/media-center/press-releases/forward-thinking-solution-puerto-rico"
target="_blank">Food costs twice as much</a> in Puerto
Rico as in Florida. This too, is a <em>de facto</em>
tax.</p>
<p>And then, in 2017, the U.S. Congress dealt the <em>coup
de </em><em>gr</em><em>â</em><em>ce</em>: a <a
href="http://money.cnn.com/2017/12/19/news/economy/us-tax-overhaul-wto-trade-europe/index.html"
target="_blank">12.5 percent tax</a> 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 <a
href="http://www.miamiherald.com/news/nation-world/world/americas/article187413268.html"
target="_blank">the entire island</a>. Pharmaceutical
companies are currently the largest private employer on
the island. They generate roughly <a
href="http://money.cnn.com/2017/09/29/news/companies/puerto-rico-drug-makers/index.html"
target="_blank">90,000 jobs</a>, provide <a
href="https://aldia.microjuris.com/2012/11/16/la-industria-farmaceutica-domina-la-manufactura-en-puerto-rico/"
target="_blank">over half the manufacturing</a>, and <a
href="https://www.bloomberg.com/news/articles/2017-12-05/puerto-rico-warns-tax-reform-could-slash-revenue-by-one-third"
target="_blank">supply an estimated 30</a> percent of
the island’s tax revenue. But this 12.5 percent export
tax will force the <a
href="https://theintercept.com/2017/12/13/gop-tax-plan-could-devastate-puerto-ricos-manufacturing-sector-with-one-line/"
target="_blank">pharmaceuticals</a> and <a
href="https://www.npr.org/sections/health-shots/2017/11/27/566771228/puerto-ricos-medical-manufacturers-worry-federal-tax-plan-could-kill-storm-recov"
target="_blank">medical manufacturers</a> to leave
Puerto Rico, and seek a more hospitable tax climate.</p>
<p>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 <a
href="https://www.huffingtonpost.com/entry/puerto-rico-farmers-road-to-recovery-post-hurricane-maria_us_5a0f4bd9e4b0e97dffed381d"
target="_blank">80 percent</a> of the island’s crop
value, killed over <a
href="https://www.usatoday.com/story/news/world/2017/10/07/puerto-ricos-farmers-face-near-total-loss-hurricane-maria/736372001/"
target="_blank">2 million chickens</a>, and killed or
severely affected <a
href="https://www.huffingtonpost.com/entry/puerto-rico-farmers-road-to-recovery-post-hurricane-maria_us_5a0f4bd9e4b0e97dffed381d"
target="_blank">4,200 cows</a>.</p>
<p><a
href="https://www.nbcnews.com/news/latino/pre-accelerator-offers-way-help-puerto-rico-based-young-entrepreneurs-n823561"
target="_blank">Entrepreneurial efforts</a>, <a
href="https://www.forbes.com/sites/meimeifox/2017/12/01/meet-the-expeditionary-entrepreneur-helping-puerto-rico-recover-by-rebuilding-small-business/#c47de727e08d"
target="_blank">nascent industries</a>, <a
href="https://techcrunch.com/2017/01/15/puerto-rico-turns-to-tech-and-entrepreneurialism-to-revitalize-the-economy/"
target="_blank">technology start-ups</a> and <a
href="https://theconversation.com/for-many-in-puerto-rico-energy-dominance-is-just-a-new-name-for-us-colonialism-80243"
target="_blank">alternative energy exports</a> will
also be relegated to second-tier status in the U.S.
market, by this export tax. All the best intentions, and
all the “<a
href="https://www.nbcnews.com/news/latino/puerto-rico-parallel-18-entrepreneurship-program-sees-results-n787186"
target="_blank">small business incubators</a>” 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.</p>
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<p>All across the island, a <a
href="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"
target="_blank">downward spiral</a> will set in: with
shrinking markets, <a
href="https://www.reuters.com/article/us-munis-puertorico/sp-downgrades-puerto-rico-debt-to-junk-status-idUSBREA131M720140204"
target="_blank">dwindling access to capital</a> and an
<a
href="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"
target="_blank">eroding tax base</a> creating an
inevitable <a
href="http://www.businessinsider.com/puerto-rico-devastation-hits-already-tattered-island-economy-2017-9"
target="_blank">shutdown</a>. 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 <a
href="https://www.census.gov/quickfacts/MS"
target="_blank">half that of Mississippi</a>, the
poorest state in the U.S.</p>
<p>For all these reasons the <a
href="https://www.bostonglobe.com/metro/2017/12/12/puerto-rican-governor-denounces-tax-bill-devastating-island-recovery/55TrH5UnCjlGknl8KmuZQL/story.html"
target="_blank">governor of Puerto Rico</a>, the <a
href="http://thehill.com/policy/finance/362309-san-juan-mayor-gop-tax-bill-would-be-more-devastating-to-puerto-ricos-economy"
target="_blank">mayor of San Juan</a>, Democratic Sen.
<a
href="http://www.tampabay.com/florida-politics/buzz/2017/11/30/tax-bill-would-send-another-hurricane-to-puerto-rico-says-bill-nelson/"
target="_blank">Bill Nelson</a> of Florida and <a
href="http://www.miamiherald.com/news/nation-world/world/americas/article187413268.html"
target="_blank">many</a> <a
href="https://www.thedailybeast.com/gops-tax-bill-would-be-worse-for-puerto-ricos-economy-than-hurricane-maria"
target="_blank">others</a> have declared that the GOP
tax plan will wreck what little is left of Puerto Rico’s
economy – <a
href="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"
target="_blank">as badly, or even worse</a>, than
Hurricane Maria.</p>
<p>It doesn’t have to be this way. Congress could <a
href="http://www.orlandosentinel.com/opinion/os-ed-tax-bill-pushes-puerto-rico-into-economic-depression-20171221-story.html"
target="_blank">act consistently</a>, 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 <a
href="http://www.globaltrademag.com/global-trade-daily/news/legislation-would-exempt-puerto-rico-from-the-jones-act"
target="_blank">U.S. Virgin Islands</a>. Congress
should work toward a <a
href="https://www.linkedin.com/pulse/20141028132251-164160252-puerto-rico-manufacturing-positioned-for-a-renaissance/"
target="_blank">fundamental rebirth</a> of Puerto
Rico's economy, rather than embalm it as a tax haven for
the <a
href="https://www.marketwatch.com/story/puerto-rico-woos-rich-with-hefty-tax-breaks-2014-04-22"
target="_blank">well-connected</a> and captive market
for <a
href="http://periodismoinvestigativo.com/2014/05/puerto-rico-first-in-the-world-with-walgreens-and-walmart-per-square-mile/"
target="_blank">U.S. consumer products</a>.</p>
<p>Members of Congress better do it quickly. As of this
moment, Puerto Rico is projected to have the <a
href="https://qz.com/1137351/hurricane-marias-impact-on-puerto-ricos-economy-and-jobs/"
target="_blank">worst economy on the entire planet</a>
in 2018.</p>
<p><em>Nelson A. Denis, a former New York State
assemblyman, is the author of “<a
href="https://www.amazon.com/War-Against-All-Puerto-Ricans/dp/1568585616"
target="_blank">War Against All Puerto Ricans:
Revolution and Terror in America’s Colony</a>.”</em></p>
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