This week the much-awaited report from the Congressional Task Force on Economic Growth in Puerto Rico was delivered to the House and Senate. Even though the lawmakers who asked for it have left Washington for the year, the fiscal and economic problems confronting Puerto Rico certainly haven’t left that island territory.
Puerto Rico's single greatest challenge is getting the private sector out from under the crushing burden of an over-taxing, over-spending, and over-regulating public sector -- a burden for which both Washington, DC and San Juan are responsible. The Task Force’s report provides several useful (and a few less useful) starting points for doing so.
The Task Force's recommendation regarding the applicability of current Tax Code provisions such as the Section 199 manufacturing deduction is spot-on. Until Congress overhauls the entire system, at the very least, this section of the law that provides some relief for job-creators should apply with the same certainty toward Puerto Rico as it does for the rest of the United States. The Task Force likewise deserves praise for being receptive to more competitive tax policies for businesses investing in the Commonwealth.
Not all of the report's advice is ideally suited for implementation. Offering Puerto Rico expanded assistance programs from the Small Business and Economic Development Administrations, agencies which taxpayers have rightly criticized in the past for careless oversight, should be regarded with caution.
Yet, it is long past time to get beyond general recommendations and get to enactment of specific remedies. National Taxpayers Union and many other advocates have offered specific plans for Puerto Rico that would work in harmony with the most often-discussed federal corporate tax reform initiatives. In addition, federal leaders must consider other urgent reforms that were left out of the main report but were abundantly clear in public submissions to the Task Force (including NTU’s here). A prominent standout is relief, even partially, from Jones Act shipping restrictions.
By the same token, Puerto Rico's government must reshape its entire approach to how it raises revenues and expenditures, so as to make the Commonwealth a regional economic powerhouse not only among states on the Mainland but also among nations in the Caribbean. Reducing local taxes as well as gaining control over pension liabilities are key to this effort.
The Task Force's report is one of many tools that public officials now have to provide all U.S. taxpayers, including those who reside in Puerto Rico, the accountable government and strong free-market economy they deserve. The incoming Congress and Administration need to pick up those tools and get to work right away in 2017.