For decades, Puerto Rico has sought to create an attractive climate for private investment, but the PIP will end this approach by eliminating incentives and imposing higher taxes on corporations and individuals, writes Carlos Díaz Olivo.
The independence plan manifests reticence towards private economic activity, considering the judgment of state bureaucrats superior to that of the citizen regarding what is in his best interest, writes Carlos Díaz Olivo (Alexis Cedeño Laboy).
In this electoral process, the Puerto Rican Independence Party (PIP) maintains that its triumph is not to be feared because it will not alter the existing economic arrangement. In its Patria Nueva program, the PIP announces the adoption of a corporate taxation system that will not distinguish between “exempt” and “regular” companies and that will reestablish “greater progressivity in income taxation”.
It will impose a 15% rate on U.S. corporations and “revise the deduction and tax credit scheme for individuals to avoid taxpayer privileges”. It indicates that high-income individuals are targeted, but does not define what “high-income” means. It also announces the “reestablishment of the alternative tax rate of 20% on the sale of capital assets consisting of real estate”.
Patria Nueva condemns the benefits of Law 22, today Law 60, because it considers that they encourage evasion and cause the “displacement of communities, making the real estate market dysfunctional, causing extraordinary increases, both in housing prices and rents”. According to the pro-independence proposal, “it is urgent to protect as much land as possible for our food production sector.
It thus announces that they will have to “identify, conserve and protect at least 750,000 acres of land for a prosperous and competitive agriculture”, for which reason it is proposed “that all agricultural land that is not dedicated to production shall pay a luxury tax, a fiscal measure that will stimulate its owners to produce or pass it on to whoever can put it into production”.
Regarding federal funds, the independentistas postulate that “contrary to the belief propagated by the regime, the increase in federal transfers has not brought prosperity to Puerto Rico, it has been the other way around.” Therefore, they declare that “they will have to be redesigned so that they are not mere instruments to advance socio-political clientelism, but part of the transition process towards national sovereignty and independence, in which final scenario federal funds will cease to be necessary.”
For decades, Puerto Rico has sought to create an attractive climate for private investment. The PIP will put an end to this approach by eliminating incentives and imposing higher taxes on corporations and individuals. These changes will have a significant impact on our economy. The Return on Investment Report prepared by the Department of Economic Development reveals that the investment of the so-called “law 22″ by 2022 resulted in the creation of 8,266 direct jobs and 19,304 indirect jobs; 27,570 in total. Tax collections amounted to $201 million. In addition, 793 export businesses were developed by these investors and the rehabilitation of deteriorated structures, which increased the supply of rooms in the tourism market. Occupancy tax collections exceeded $20 million.
The elimination of the incentives of Act 22 entails the loss of millions of dollars for our economy. Added to this is the negative impact that Puerto Ricans will experience due to the increase in the taxation of the profits generated from the sale of their properties and those that will emanate from the penalty to the owners of land that, in the government's opinion, are underutilized or underutilized. These taxes on real estate activity may cause paralysis and devaluation in the real estate market. The declared objective of the independence movement to redesign federal aid to make it unnecessary, affects the most vulnerable citizens and what a Moody's Analytics study revealed by El Nuevo Día, considers the current mainstay of our economy.
The plan of independence manifests reticence towards private economic activity as it considers the judgment of the State bureaucrats superior to that of the citizen regarding what is convenient and should be done. This model has been implemented in other societies without major success. Partners in solidarity with government interventionism and opposed to free choice for individuals and companies, they support it.
The fundamental question is whether this increased government authority over individual economic freedom is what Puerto Rico wants and needs. If the answer is “yes”, the triumph of independence in the next election is imminent and we must prepare for the consequences that have been announced.
This article was originally published in Spanish at El Nuevo Dia.
