Tax Incentives and Puerto Rico
But I thought that Puerto was bankrupt with a disastrous economy whose nearest U. S. counterpart is Mississippi.... oh, and yes, Kentucky. When it comes to indebtedness Puerto Rico can teach all on comers a dreadful lesson. With seventy four billion dollars in the red, mostly due to unpaid bonds, utility bills and public pensions, Puerto Rico demonstrates patterns similar to the poorest states under the American flag. It is a poor country for poor people, BUT it can be a rich country, if you have a few billion to spare. How can this be?
Kentucky well knows the lesson of tax incentives. It offers potential investors billions more in tax incentives than it receives in revenues. Negative financing doesn't work if you are poor, be it as a state or as an individual, BUT it works fine if you find yourself in Forbes magazine. Puerto Rico apparently has created the ideal tax dodge for millionaires, better than the Caymans, better than the Bahamas. Its creative legislature, on January 12, 2012, approved the Puerto Rican Tax Incentive Bill. Article 20 and 22 offer, for those qualify, tax exemption from Puerto Rican income tax and dividends, all interests, all short and long term capital gains, accrued after the individual becomes a bona-fide resident of Puerto Rico (residing 128 nights on the Island). Puerto Ricans do not pay federal income tax. To qualify for such exemptions there is a listing in Act 22 of how your finances ought to be invested - not necessarily in Puerto Rico. Exemptions are possible for twenty years, with extensions for another ten years. Can you imagine decades of sun, sand, and no taxes of any kind?
As a graduate of two Puerto Rican Universities, I can tell you that 20/22 excludes most Puerto Ricans, forty-five percent of whom have incomes beneath the poverty level. Nor does this resolve Puerto Rico's indebtedness. Whatever possible financial benefits from 20/22 would come from employment for serving the new wealthy class, a true example of trickle-down economics. For those dissatisfied with the lack of availability of accustomed emendates, medical, dental, shopping, legal, or entertainment, for a simple annual service fee a private firm will make all these things readily available.
Puerto Rico can do this because it is a special Commonwealth "Estado Libre Asociado de Puerto Rico", (The Freely Associated State of Puerto Rico). Puerto Ricans have had several plebiscites to decide its political status. I personally witnessed one in the once rebel held town of Jayuya. Statehood was rejected, as was independence. Puerto Rico's uncertain "Commonwealth" status makes 20/22 perfectly legal. If it were copied on the mainland i. e. Kentucky, it would be the Commonwealth's "right to work" on steroids. Who knows what the future would hold for the Bluegrass Commonwealth? Se habla espanol?