Tuesday, February 9, 2016

An Important Step Towards The Solution of Puerto Rico's Economic Crisis

This Budget Proposal item will undoubtedly be discussed in Congress, but it is a first step towards helping Puerto Rico. The Republican Congress has shown great interest in helping our Island, and we are very grateful. We ask that the options go further than a simple patch which would solve the solution only temporary. We ask Congress to be righteous, and initiate the necessary steps for Puerto Rico to become a state of the Union. They can start doing justice to millions of US citizens, by incorporating the territory of Puerto Rico. MJ

Obama budget includes bankruptcy power, billions in relief for Puerto Rico

President Obama is proposing to provide Puerto Rico with billions of dollars in relief, in addition to allow the territory to declare bankruptcy on some of its debt.

The president’s fiscal 2017 budget proposal, released Tuesday, includes several policy changes aimed squarely at helping the territory boost its economy, and get out from under a debt burden island officials say is unmanageable.

Among the changes are bankruptcy power for Puerto Rico, an expansion of the Earned Income Tax Credit to the island, and increased Medicaid funds. All the policy changes, if enacted, would apply to Puerto Rico and other U.S. territories. The president’s plan would also subject the island to “strong fiscal oversight,” but does not detail exactly how.

After years of economic decline, Puerto Rican officials are warning the island will not be able to pay off its most important debts for more than a few months at most. The issue of how to help the island, and the millions of American citizens living there, has become a top priority for Congress. Speaker Paul Ryan (R-Wis.) has vowed to produce legislation on the matter by the end of March.

The White House plan would allow Puerto Rico to undergo a “comprehensive restructuring” of its debts, a move likely to be fiercely contested by investors in Puerto Rican debt eager to be paid in full.

In addition, the administration wants to extend the Earned Income Tax Credit, currently available in all 50 states, to Puerto Rico and other territories. That credit is available to low and middle-income individuals and families. According to the White House, such an expansion would cost $601 million in fiscal 2017, and $6.6 billion over the next decade.

Obama’s budget would also scrap a cap on Medicaid funds that currently applies to territories, and would gradually increase Federal Medicaid matching funds until they fall in line with levels enjoyed by U.S. states.

Such a shift would cost $320 million in fiscal 2017, and $29.6 billion over the next decade.


US citizens in Puerto Rico experience two very different realities: Most of the 3.5 million US citizens in Puerto Rico depend on a bloated, inefficient and corrupt government to receive essential security, health and education services. There is also a small group of very wealthy individuals and enterprises who live comfortably, avoiding tax legally or evading tax ilegally. Tax evasion in Puerto Rico is about 35% for income tax and sales tax.
The current administration in Puerto Rico actively promotes the island as a tax heaven for hedge fund managers. More than 200 mainland hedge fund millionaires avoid federal taxes on their financial investments by claiming the Island as their residence. This tax loophole is a blatant abuse of the I.R.C Section 933, which was enacted by Congress almost one century ago solely for residents born in Puerto Rico.
An effective tool to reduce tax evasion in Puerto Rico would be to give authority to the IRS to collect federal income taxes in Puerto Rico. The IRS can do the tax collections and then hand them over to the local government, similar to the rum tax collected by US customs, after deducting operational costs.
According to the latest GAO estimates, the wealthy in Puerto Rico will pay more than enough federal income taxes to solve the fiscal crisis. See GAO-14-31 inwww.gao.gov. Deleting IRC Section 933 would end the blatant tax competition by Puerto Rico against the 50 states and bring in sufficient internal collections to end its fiscal crisis without a federal bailout.

Time for Puerto Rico to be independent or become the 51 state....we can't keep throwing good money after bad.