Photo: Newsletter A fin de Cuentas of El Nuevo Día, autor Joanisabel Gonzalez, Business Editor.
After reading the report Taxes in Puerto Rico: Structure, Tax Burden, and Comparison with the United States, published this week by the Institute for Economic Liberty (ILE), I wonder what exactly we have achieved with so many injustices to the tax system of the country, colony, territory—call it what you will—other than to swell the public coffers in exchange for receiving less, time and time again.
I have written on occasion that our individual and collective history is a kind of task to compensate for the many institutional slights we have received. If there is no good public school nearby, we resort to private school; if there is no water, we resort to cisterns; if there is insecurity, we compensate with bars, alarms, cameras, and firearms...
At home, at the beauty salon, at the pharmacy, or at the supermarket, it's a burden you have to live with, but it's infuriating when you read that 62% of the government's income tax revenue comes from just 7% of taxpayers who report incomes of over $100,000. Or when you read that four out of 10 taxpayers did not pay a penny to the tax authorities for the same concept. It must be uncomfortable for more than one person to know that the tax obligation of corporations in Puerto Rico is 4.4 times higher on the island than in many states in the United States.
It is striking that, in a jurisdiction where the issue of federal taxation is played out politically, the study conducted by economist Edwin Ríos and researcher Angel Carrión Tavárez concludes that for every $1 we pay in municipal or local taxes, we pay $2.23 in federal taxes, in the form of contributions to programs such as Social Security, but also through other channels such as customs duties and tariffs.
All that and more can be found in the ILE analysis we are reviewing today.
We often forget that the resources we devote to this dual system—that is, what we have to do to ensure a more or less reasonable life or operation and what we pay to the state—and that we have accepted in Puerto Rico are a kind of missed opportunity.
How many more jobs could have been created, how much progress could families have made if the money they spend on keeping the lights on had been directed toward health or education?
It should be noted that the ILE exercise focuses on state and local or municipal taxes, and in many states, income tax is a source of revenue for the federal government. In other jurisdictions, the report notes, there is greater reliance on property taxes than in Puerto Rico.
The interesting thing is that when the same yardstick is applied, “Puerto Rico's state and local tax burden, whether measured by Gross Domestic Product (GDP) or Gross National Product (GNP), is higher than that of the 50 states,” and that is something that should not be forgotten. In relation to GDP, that burden is around 13.6%, and in relation to GNP, it reaches 17.3%. What kind of Puerto Rico would we have if the money we pay to the treasury were used more effectively?
Often, studies conducted in Puerto Rico to modify the tax system focus on bringing money into the treasury or giving to some in order to take away from others. In the post-Fiscal Oversight Board (FOB) era, “revenue neutrality” prevails. The ILE exercise analyzes the tax system from the perspective of those who pay taxes: you and me.
Perhaps the Tax Reform Committee—which has been working in the utmost secrecy for months on a new recipe for Puerto Rico—could take a look at it.
This article was originally published in Spanish by the newsletter A fin de Cuentas of El Nuevo Dia.
