A NONBAILOUT BAILOUT: Here’s the bad news for all those Republicans dead set against bailing out Puerto Rico — they kind of already are.
Our Brian Faler has more on the rather convoluted setup that Marty Sullivan of Tax Analysts called “a backdoor bailout because it is under the radar, it’s complicated and hard to understand, but the economic effect is the same.”
Here’s how it works: Puerto Rico put a tax on American companies operating on the island, mostly pharmaceutical and medical device companies. The tax was designed so that the companies could get the foreign tax credit that offsets part of their bill with the Treasury. In the end, that means the businesses didn’t have to pay any more, and Puerto Rico got about $1.9 billion in new revenue in 2012 that was effectively underwritten by the U.S. government. (That influx turned out to be more than one-fifth of the island’s revenues.)
How under the radar is the scheme? A spokesman for House Speaker Paul Ryan said he didn’t know anything about it. Former Gov. Luis Fortuno of Puerto Rico dismissed complaints that the setup is unfair to U.S. taxpayers as “ivory tower” questions. Fortuno is now a partner at the Steptoe & Johnson law firm, which just happened to help set up the special tax arrangement while he was governor. http://politico.pro/1q1BhvO