Mr. Fortuño has a much different view of the problem: He thinks high taxes have destroyed the Puerto Rican economy. He has already signed into law a five-year property tax holiday for real estate purchased through June of next year and waivers on fees for those transactions. Last week he handed his legislature a radical plan to simplify the tax code and sharply reduce corporate and individual rates.
Mr. Fortuño says that Puerto Rico’s recession—which began two years before the U.S. recession—only partly explains the current crisis. “If you look at the past decade, Puerto Rico has had negative growth for the entire period.” (According to his office, the economy contracted 0.2% in the 2000s.) This shows, he argues, that “we are in need of a major overhaul. If we just tweak it a little, we won’t accomplish what we need.”
The governor says he cut 20% of the budget but “it was not enough.” Puerto Rico needs “to provide an environment for our people to flourish and to let their ingenuity take them where they want to go.” He adds: “Puerto Rico has not been competitive. Investors have been going to Singapore and Ireland. Our system was failing us.” And it wasn’t for lack of capital. Commonwealth debt offerings, he says, always sell out quickly. “There is plenty of money here but it has not been worthwhile taking risk” in private-sector ventures.
To change that risk-reward profile, the Fortuño plan dramatically reduces corporate tax rates and raises the income levels in which higher rates kick in. The new schedule will replace six brackets with three and move the top corporate rate of 41% on income over $500,000 down to 30% on income over $2.5 million.
More about Mary O’Grady’s article in the podcast.
Other news about Puerto Rico,
Natural gas key to Puerto Rico’s energy future
Puerto Rican governor Luis Fortuño has given his backing to a project for a dedicated gas pipeline that will exploit the natural gas deposits of the country in an effort to find alternatives to oil for power generation, according to a report in El Nuevo Día.
“The price of oil has kept rising and we see this in the petrol we buy, while the price of natural gas is not going up.
“As governors we must adapt to the times and in these two years that is what has happened and I believe that it is important to eliminate oil because it is more expensive, dirtier for the environment and much more dangerous,” Fortuño said.
According to the governor, he also signed two pieces of legislation this summer that will help increase the generation of renewable energy “from virtually zero to 15 per cent”.
Mexico, U.S., Puerto Rico, Singapore and Australia Nominate Most Students to Global Student Entrepreneur Awards
Puerto Rico to invest more money in rum promotion
National Puerto Rican Coalition expects the new Congress to reverse corporate welfare utilization of Rum funds
Back in 2009, the Economist was saying,
In need of resuscitation
Puerto Rico’s economy has shrunk for three years running