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Press Release


Time Running Out for Puerto Rico’s Leaders to Halt Job-Killing Tax Hike, Citizen Group Says

November 9, 2010
By Pete Sepp

(Alexandria, VA) – Just days remain for Puerto Rico’s public officials to avoid a tragic mistake for the Commonwealth’s economy by repealing a hastily-enacted law targeting manufacturers with heavy new taxes. That’s the assessment of the 362,000-member National Taxpayers Union, which today called upon elected officials to support emergency legislation rolling back the ill-advised tax hike before a procedural deadline later this week closes off that option.  Pete Sepp, Executive Vice President of NTU, offered the following comments on the need for swift action. (NTU has members in all 50 states as well as U.S. territories including the Commonwealth of Puerto Rico.)

     “What elected officials do – or fail to do – in the next several days could affect Puerto Rico’s economy for years to come. By keeping its policies toward major manufacturers moderate and affordable, Puerto Rico’s government has benefited from a stable source of revenue while its citizens have benefited from job-creation. But this prudent and mutually productive arrangement is in serious danger, thanks to tax-law decisions that seem motivated more by sound-bite politics than sound economics.

     Worse, some public officials are calling for even more punitive taxes, which could snap the backbone of Puerto Rico’s private sector and cripple opportunities for the Commonwealth’s families. As NTU noted two weeks ago, if past history is any guide the ‘temporary’ 4 percent tax rate was unlikely to remain that way for very long. And now, incredibly, ‘very long’ already seems to have arrived, with some leaders calling for a permanent tax rate of 7 to 10 percent. If allowed to stand, the supposedly low and short-lived tax will serve as a tempting marker for those with greater ambitions to grow government.

     Governor Fortuno’s fiscal plan contains many wise elements, including personal and corporate tax-rate reductions, spending restraint, and repeal of the alternative minimum tax. These gains need not come at the loss of a significant competitive advantage Puerto Rico offers to those willing to invest manufacturing resources in the Commonwealth. Indeed, the ripple effects could reach to many corners of the United States. As many U.S. states and other nations have discovered, it is much more difficult to regain rather than retain a reputation for consistent tax laws. The Commonwealth cannot afford to be saddled with an image of arbitrary policies.

     It doesn’t have to be this way. By taking action this week to reverse the pending tax increase, and instead committing to additional budgetary restraint, Puerto Rico’s leaders can escape a harsh sentence that could otherwise confine their people to poor economic conditions for years.”

NTU is a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, and economic freedom at all levels. Note: additional analyses and commentaries on tax competition and reform are available at www.ntu.org or text “FIGHT” to 67292.