Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation?
There's a statehood faction, an independence faction, and a big "don't upset the gravy train" faction that likes the status quo. If Puerto Rico became a state, US Federal personal income taxes would be imposed. If Puerto Rico became an independent country, immigration to the US would be stopped.
There have been referendums on this. The next one is June 11, 2017.
There have been referendums on this. The next one is June 11, 2017.
I did not realize there was a vote that close. I'm sure I read about it but forgot. I bet you could learn some very interesting things by studying the costs and reach of advertising via Facebook or whatever social networking platform predominates in PR, since vast sums of money could be gained or lost based on the outcome of the referendum.
I don't really have the time or expertise to research this, but I would be extremely interested to know who is spending money on trying to influence the outcome. It seems like it would have significant consequences for the USA in general as well as PR in particular, and election manipulation seems to be a hot growth industry lately.
> I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden.
Based on a couple of minutes of reading from wikipedia ( https://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico ), it sounds like the federal income tax is only eliminated as to income from sources in Puerto Rico. If your income is mostly capital gains from your vast stockholdings, what's the "source"? How exactly is this working? Do you have to be invested exclusively in stocks listed in Puerto Rico? (Do those exist?) Do you have to be exclusively invested in Puerto Rico government bonds? Is his hedge fund incorporated in Puerto Rico, and that's enough?
Shell companies are your friend. You can move a lot of money around faster than the authorities can follow the paper trail in many cases. That's why some people refer to delaware as the world's biggest tax haven - Delaware is extremely friendly to corporations and it's trivially easy to set one up. So if you are skilled in the technicalities of company formation and business administration, you can make your audit trail very difficult to follow.
Here's a local law where if you meet all the criteria (income made off the island, spend > 180 days per year here, various other criteria), you're exempt from income taxes here. And since you're a resident, all your income is here. Effectively exempting you from federal income taxes.
The idea was to attract high net worth individuals to spend money here.
Every analysis I've seen says it has worked quite well.
Crazy. So if you move to PR but making money from other US based interests you get exempted from US federal income tax, but if you move and work permentantly in say Germany, you still get charged US Federal Income tax?
I'm not familiar with the Puerto Rico situation, but elsewhere, some (likely significant) portion of your foreign-earned income may be excluded from your US tax burden. For most people who earn money abroad this means that while you must file taxes, you likely don't pay anything to the US Gov't on foreign-earned income.
I find the whole taxation-by-citizenship thing ludicrous and coupled with the separate Foreign Bank Account Reporting for accounts having more than $10k taxes are a headache for Americans living abroad.
That was my question. The US is one of two countries where US citizens are required to file taxes even if they're not living in the country (the other is Eritrea).
If I remember correctly, PR and Guam are the two places in the world where your income is exempt from federal income tax, if you pay local taxes. There are some exceptions to that.
It's supposed to give some local autonomy to the taxation process and fiscal management.
> Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation?
Puerto Rico's economy has been crippled by the Jones Act, which affects all US states/territories that rely solely on sea transportation for trade with the US. Hawaii is the only state that fits that description, and they've also been suffering deeply due to the Jones Act, although not as badly as Puerto Rico (for reasons due to the specifics of Hawaii's economy, not its statehood).
Used to be that Puerto Rico was once upon a time #1 in manufacturing, Japan was #2. The USA and England followed. Something to think about. Puerto Rico exports out of the US more pharmaceuticals than California currently, or at least it did in 2015[0]. There's so much potential for Puerto Rico. We also have a lot of engineers in NASA (or did?) because they go to Puerto Rico to hire engineering students if I remember correctly from Mayaguez. So much potential and it's sad to see it go to waste, I think all Puerto Ricans are to blame as much the people as the politicians. We all always blame politicians but as a people we don't do enough.
> I think all Puerto Ricans are to blame as much the people as the politicians. We all always blame politicians but as a people we don't do enough.
I can't think of a single thing Puerto Ricans could reasonably and legally do that would have fixed this problem.
The inability to import/export things at reasonable rates has crippled the economy, and nothing short of federal policy changes (which Puerto Ricans cannot directly influence, short of moving to the mainland) would impact those fundamental economic realities.
I meant in regard to current problems. There is crazy corruption. Like how much some politicians and judges make after retirement, which was brought to court, but who hears a case when it's against a judge other than a judge?
States do not have access to chapter 9 bankruptcy. If Puerto Rico were a state then it would not have the bankruptcy protections that it currently enjoys right now. Things would be much much worst for them in that case.
I think the point is that the states, being states, are in the same situation as the federal government is. They can tell creditors to go *k themselves. And then both sides get to bear the consequences.
In truth, something similar is true for local governments as well, in practice.
Yes, being a state would solve some of these fiscal issues. It's even been discussed for the past few years that this debt situation might be the thing that pushes Puerto Rico to actually become a state.
The major problem is that Puerto Ricans don't actually want to become a state. In the various referendums, the majority generally goes for status quo, followed by statehood, followed by independence. In 2012, the referendum was more or less connived to produce a vote for statehood (it was structured as two questions, the first "status quo or not" and the second "state, free association, or complete independence"). There's apparently another referendum scheduled in a month, but I've not found any polling on what the likelihood of success for statehood is in that referendum.
I was in San Juan last month and spoke with ~12 people on the topic. It was roughly an even split between statehood and status quo. Many anticipated a declaration of insolvency and figured statehood was the best fix for the problem.
> Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation?
In the narrow sense, traditional municipal bankruptcy would have been available to it in this situation (and creditors would have acted with that knowledge, which would likely have forestalled it getting to the current situation) were that the case.
More broadly, PR would have greater influence in federal policy were it a state with voting representation in Congress and electoral votes for the Presidency, which would also make it less likely that things would have gotten this bad.
They would have been able to filibuster and stop congress from removing the pharma subsidy that then resulted in pharma companies fleeing the island. This in turn lead to the underfunding of pensions and general budget shortfalls on the island. So... maybe they'd have made out better as a state. Who know though, they had all their eggs in 2 baskets basically.
