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Puerto Rico: A Resort for Rich Investors?

Mic’s Gabe Gonzalez made the plight of Puerto Rico’s residents more tangible to many people when he created a Facebook video objecting to the fact that his mom didn’t get to vote in the 2016 presidential election. When she moved from Florida to Puerto Rico, she lost the right to vote in presidential elections.

She still pays taxes, as Gonzalez points out. Puerto Rico has paid as much in federal taxes as Vermont, but has no senators, no voting representatives in the House, and no chance to vote for the president who governs Puerto Rico.

The taxation/representation equation matters because the tax differences between Puerto Rico and the States are often used an an excuse for Puerto Rico’s lack of equal treatment under federal law. Puerto Ricans pay Social Security and Medicaid taxes, federal taxes on state-based income, and the highest sales tax in the nation.

Read about the federal income tax  the Puerto Ricans pay.

However, many Puerto Ricans would not pay federal income taxes on Puerto Rico sourced income if they had to file. Like nearly half of the people living in the States, the average Puerto Rican doesn’t earn enough money to owe federal income tax. If Puerto Rico were a state, most of the residents would be eligible for EITC and Child Tax Credits, which provide an income tax “refund” for millions of working people in the U.S. who don’t earn enough to pay income tax.

In the states, the Earned Income Tax Credit and the Child Tax Credit were responsible for lifting 9 million working people out of poverty in 2010 and reducing child poverty by 7% in 2014.

Meanwhile, wealthy investors and mainland corporations benefit from Puerto Rico’s treatment as a foreign country under U.S. tax law.  This situation was explored in depth by a U.S. Senate Subcommittee in 2012, but no reforms were made. “Puerto Rico,” Gonzalez concludes, “is treated like a resort for rich investors.”


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