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To Avoid Becoming The Next Detroit, Puerto Rico Needs Growth, Not Taxes
IBD ^ | 02/11/2014 | Editorial

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 ...


TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: bankurptcy; detroit; puertorico

1 posted on 02/11/2014 5:32:57 AM PST by SeekAndFind
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To: SeekAndFind

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.


2 posted on 02/11/2014 5:36:47 AM PST by Yorlik803 ( Church/Caboose in 2016)
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To: SeekAndFind
¡Puerto Rico! ¡Independencia hoy!
3 posted on 02/11/2014 5:48:16 AM PST by Paine in the Neck (Our Lives, our Fortunes, and our sacred Honor)
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To: SeekAndFind

Puerto Rico needs independence, so we can be rid of its fiscal disaster


4 posted on 02/11/2014 5:51:12 AM PST by montag813
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To: SeekAndFind

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.


5 posted on 02/11/2014 6:00:16 AM PST by muir_redwoods (When I first read it, " Atlas Shrugged" was fiction)
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To: muir_redwoods
Will the last PR leaving for the US please turn out the light...
6 posted on 02/11/2014 6:02:09 AM PST by Eric in the Ozarks ("Say Not the Struggle Naught Availeth.")
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To: muir_redwoods

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.


7 posted on 02/11/2014 6:23:38 AM PST by woodbutcher1963
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To: montag813

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.


8 posted on 02/11/2014 6:38:04 AM PST by SeekAndFind
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To: montag813

The day Puerto Rico declares independence, there will be about 3 million Puerto Ricans booking the first flights to Nueva York.


9 posted on 02/11/2014 6:39:53 AM PST by dfwgator
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To: SeekAndFind
Puerto Rico is run by Democraps and socialists. That's why it's a basket case. We need to give them total independence and let them assume their rightful place beside the thriving worker's paradise of Cuba. Screw the U.S. Big Business interests, they don't pay the welfare and other taxpayer funded overhead for the failed Commonwealth of Puerto Rico.
10 posted on 02/11/2014 6:51:19 AM PST by MasterGunner01
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To: MasterGunner01

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


11 posted on 02/11/2014 7:03:21 AM PST by gingerbread
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