Miriam J. Ramirez MD
Former Puerto Rico State Senator
ORAL Statement for the June 24, 2015 Hearings On Puerto Rico
Subcommittee On Indian, Insular, And Alaskan Native Affairs
Honorable Chairman Young and members of the Committee: My name is Miriam Ramirez, I am a medical doctor, former Senator of the New Progressive Party in Puerto Rico, and founder of a non-partisan grassroots movement, called Puerto Ricans in Civic Action, which gathered more than 350,000 individually signed petitions for statehood and delivered them to Congress in the 1980s.
Mr. Chairman, it is has been a privilege to know you and count on your solid and courageous support to advance our struggle to achieve equal rights for the almost 4 million disenfranchised US citizens in Puerto Rico. Decades ago you responded with your full support when more than 350,000 Puerto Ricans petitioned Congress for Statehood. Today you are again giving us an opportunity to obtain our equal rights and obligations as U.S. citizens of this great Nation.
In my testimony on May 22, 1986, when Congressman Morris Udall was the Chairman, I identified our lack of full rights as US citizens as the fundamental reason for the poor economic performance of Puerto Rico, compared to other states. Today I want to focus my testimony on the negative consequences of the federal tax regime that has kept Puerto Rico labeled as a “foreign” jurisdiction for almost a century.
In1996 after Section 936 was eliminated, the former Section 936 firms used Puerto Rico´s “foreign” tax status and converted to Controlled Foreign Corporations (CFCs). However, the CFCs in Puerto Rico are not obligated to create local jobs or to generate any real investments in order to benefit from the federal tax deferral. Using transfer pricing abuses, the CFCs in the Island are causing the US Treasury to lose billions in federal tax revenue without creating jobs and investment in the Island. The Senate Permanent Subcommittee on Investigations identified one company in Puerto Rico that benefitted from a tax savings of $22 million per employee, but yet only generated 177 jobs.
Also, to exploit this special federal tax status, the supposed pro-statehood administration of former Governor Fortuño adopted two laws in 2012. Act 20 and Act 22 entice millionaires who reside in the 50 states to locate to Puerto Rico by taxing their corporate profits from exported services at a flat 4% rate and allowing those profits to be paid out to these owners free of Puerto Rico income tax.
Thus, the CFC regime in Puerto Rico has become a significant drain of tax revenue and a formidable opponent of statehood for Puerto Rico. Keeping Puerto Rico as a ¨foreign” country inside the United States undermines the U.S. federal tax base and creates unfair competition against local communities in the 50 states. But the truth is that Puerto Rio is governed by the CFC REGIME and the economic power of super billionaires who since Law 22 of 2012 can relocate to Puerto Rico without paying state or federal taxes.
But that is not the only damage they do..... they have the most powerful Public Relations army in the World, ready to lobby and fight against anything that endangers this outrageous tax evasion scam to the US and the US Taxpayer. Their worst concern is that Puerto Rico may become a state of the Union. They are ruthless in their attacks when they feel threatened with that possibility and will destroy or attempt to destroy anything or anyone that even remotely attempts to help the US citizens of Puerto Rico gain full citizen rights.
The CFCs are effectively in control of our major political parties and their governing agenda. Whenever the people put pressure for a process of self determination, millions of dollars appear out of nowhere to campaign against statehood, since it will be the death knoll for the CFC scam.
It is for this reason I that it is impossible to fight against the CFCs if we want to achieve statehood in Puerto Rico. We have to make the CFCs part of the political status solution.
Mr. Chairman, I propose that a statehood bill, with the defined terms of admission and a 20 year transition period for maintaining the CFC's in Puerto Rico, come out of your Committee. There is a precedent for previous statehood bills to include temporary tax benefits, and a transition period was included in the Senate Bill 712 in 1990. (I have submitted for the record a draft of said bill.)
BUT PLEASE DO NOT HOLD OR PROPOSE ANY MORE PLEBISCITES WITH THE VARIOUS OPTIONS. WE'VE BEEN THERE AND DONE THAT IN 2012 AND STATEHOOD WON. NOW THE BALL IN ON YOUR SIDE OF THE COURT. IT IS NOW CONGRESS THAT MUST DEFINE THE STATEHOOD ADMISSION TERMS.
THAT IS WHAT THE PEOPLE NEED TO VOTE FOR AT THIS TIME.
I am submitting a draft admission act prepared by my constitutional counsel, Attorney Roberto Santana, which also includes what I call the Costas amendment, in honor of Attorney Luis Costas who first educated me on these issues. To get the CFC's on our side, (or rather off our backs ) award the Corporations special tax incentives for a period of 20 years in the transition process.
This is the way we designed it in the original Young bill.
Thank you very much..