The MJR Report

Tax Breaks for Companies in Puerto Rico Don't Help Islanders 

• JAN. 23, 1993
  by Miriam J  Ramirez
• 
  

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To the Editor:
(by MJR)

"Trade Pact Threatens Puerto Rico's Economic Rise" (front page, Jan. 3) implies that Puerto Rico's economy continues to benefit from Section 936 of the Internal Revenue Code, which exempts United States corporations from paying taxes on profits earned in Puerto Rico.

However, these companies employ few Puerto Ricans, and 936 has done little lately to improve the island's economy or quality of life. Only 12 percent of the work force is employed by companies benefiting from 936. These companies receive a $3 billion annual tax break from the Federal Government under 936, meaning Washington provides a $100,000 subsidy for each 936 job.

These tax credits are based on profitability, not the number of jobs created. Because industries such as pharmaceuticals are not labor intensive, they do little to create the vast number of jobs and training opportunities envisioned. Instead, industries have used 936 to exempt some of their United States income from taxation. Meanwhile, the island's per capita income, at $6,000, is lower than that of any state and falling.

The North American Free Trade Agreement will not have a significant impact on the more than 600 corporations that benefit from 936. Many of these -- especially the pharmaceuticals -- are regulated by the Food and Drug Administration and cannot manufacture their products elsewhere in the Caribbean. They will not leave, with or without the trade agreement or elimination of 936.

Puerto Rico will benefit from elimination of section 936. It is time to replace outmoded economic blueprints with a strategy for today, providing United States companies with compelling reasons to operate in Puerto Rico, while offering real training and employment opportunities to an able work force. Such strategies should include a tax credit to wages and real investment as in the enterprise zone proposals before Congress.

Once Puerto Rico is a state, special tax treatments will no longer be needed. MIRIAM RAMIREZ DE FERRER President, Puerto Ricans in Civic Action Mayaguez, P.R., Jan. 7, 1993

January 23, 1993, Page 001020The New York Times Archives

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