Skip to comments.To Avoid Becoming The Next Detroit, Puerto Rico Needs Growth, Not Taxes
Posted on 02/11/2014 5:32:56 AM PST by SeekAndFind
Tax And Spend: Puerto Rico's debt has been cut to junk by two credit rating agencies, prompting an outcry from officials of the recession-hit island that, after all, they've hiked taxes. Well, that's the problem right there.
It's hard to not feel some sympathy for Puerto Rico's new governor, Alejandro Garcia Padilla, who upon entering office last year inherited a hog-wallow of $70 billion in debt, according to a long piece in the weekend's New York Times.
The governor cut spending by 2%, balanced his budget a year ahead of schedule, reformed public pensions and reduced the territory's deficit by 70%.
It wasn't good enough. Moody's cut the island's credit rating two notches to Ba2 late last week, following Standard & Poor's, which cut the municipal rating to BB+ a few days before that.
"Unjust," the governor told the Times Sunday. "I've done everything I can to avoid a downgrade," he said.
However, to make those numbers add up, he hiked taxes on corporations to 39%, far higher than the U.S. rate and well above the Organization of Economic Cooperation and Development average, and let stand a regressive tax on small businesses, giving them a top rate as high as 130%, hitting businesses with the smallest margins, such as groceries, the hardest.
That, plus the phaseout in 2006 of an important tax incentive to U.S. corporations to locate operations tax-free on the island, caused the commonwealth's manufacturing job base to plunge from 160,000 to 75,000, a Detroit-like hollowing out in a very short period.
Combined with public employee unions controlling the electricity supply, forcing companies in a manufacturing-heavy economy to pay double what companies on the U.S. mainland pay, and an increasingly failed educational system which has kept the workforce uncompetitive
(Excerpt) Read more at news.investors.com ...
No...PR needs to raise taxes.....tax the rich, tax them to hell and back. It may not have worked in Detroit but that’s because all the rich people left.
Puerto Rico needs independence, so we can be rid of its fiscal disaster
PR has the highest per capita recipients of SSDI. The SSDI allows a judge to overturn procedural decisions for qualifying for disability. PR judges routinely grant disability regardless of the merits of the claim.
Can someone please explain to me what exactly Puerto Rico’s problem?
The USVI seem to be doing OK. Why does PR have such an ongoing problem? Their real estate values seem to be very high based on what I have seen on HGTV House Hunters Intl.
I have never been there. Please enlighten me in two paragraphs or less.
RE: Puerto Rico needs independence, so we can be rid of its fiscal disaster
Maybe if they do, they can go the way of Argentina — just pay back 30 cents on the dollar.
The day Puerto Rico declares independence, there will be about 3 million Puerto Ricans booking the first flights to Nueva York.
Every sane economist in the world knows what to do, to straighten out an ailing economy. But you can accuse these liberal, socialist and communist politicians of everything you want to, but you sure as hell can’t accuse them of being a “SANE ECONOMIST” Question: WHAT IS THE ONLY PURPOSE OF THESE LIBERAL, SOCIALIST AND COMMUNIST POLITICIANS? To get elected. That’s it, they have nothing else on their minds. It’s not love of country, it’s not the willingness to be a servant. Their only job is to be elected and re-elected