(Alexandria,VA) – Just days remain for Puerto Rico’s public officials to avoid a tragicmistake for the Commonwealth’s economy by repealing a hastily-enacted lawtargeting manufacturers with heavy new taxes. That’s the assessment of the362,000-member National Taxpayers Union, which today called upon electedofficials to support emergency legislation rolling back the ill-advised taxhike before a procedural deadline later this week closes off that option. Pete Sepp, Executive Vice President of NTU,offered the following comments on the need for swift action. (NTU has membersin all 50 states as well as U.S. territories including the Commonwealth ofPuerto Rico.)
“Whatelected officials do – or fail to do – in the next several days could affectPuerto Rico’s economy for years to come. By keeping its policies toward majormanufacturers moderate and affordable, Puerto Rico’s government has benefitedfrom a stable source of revenue while its citizens have benefited fromjob-creation. But this prudent and mutually productive arrangement is inserious danger, thanks to tax-law decisions that seem motivated more bysound-bite politics than sound economics.
Worse,some public officials are calling for even more punitive taxes, which couldsnap the backbone of Puerto Rico’s private sector and cripple opportunities forthe Commonwealth’s families. As NTU noted two weeks ago, if past history is anyguide the ‘temporary’ 4 percent tax rate was unlikely to remain that way forvery long. And now, incredibly, ‘very long’ already seems to have arrived, withsome leaders calling for a permanent tax rate of 7 to 10 percent. If allowed tostand, the supposedly low and short-lived tax will serve as a tempting markerfor those with greater ambitions to grow government.
GovernorFortuno’s fiscal plan contains many wise elements, including personal andcorporate tax-rate reductions, spending restraint, and repeal of thealternative minimum tax. These gains need not come at the loss of a significantcompetitive advantage Puerto Rico offers to those willing to investmanufacturing resources in the Commonwealth. Indeed, the ripple effects couldreach to many corners of the United States. As many U.S. states and othernations have discovered, it is much more difficult to regain rather than retaina reputation for consistent tax laws. The Commonwealth cannot afford to besaddled with an image of arbitrary policies.
Itdoesn’t have to be this way. By taking action this week to reverse the pendingtax increase, and instead committing to additional budgetary restraint, PuertoRico’s leaders can escape a harsh sentence that could otherwise confine theirpeople to poor economic conditions for years.”
NTU is anonpartisan, nonprofit citizen organization founded in 1969 to work for lowertaxes, smaller government, and economic freedom at all levels. Note:additional analyses and commentaries on tax competition and reform areavailable at www.ntu.org or text “FIGHT” to 67292.