Commentary: Puerto Rico's Billionaires Strategy

Like it or not, getting wealthy individuals to move to the Island in order to avoid U.S. taxes appears now to be a cornerstone of Puerto Rico's growth drive and is characteristic of the country's eternal search for a quick and painless way to grow.

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Comments (1)
I agree with most of the comments except for the claim that these tax breaks are based "on sound economics" or "build productive capacity". These tax breaks create damaging distortions in addition to the income inequality that the author very ably describes.

The traditional tax exempt sector (manufacturing) has been the sector that has eliminated (not created) the most jobs since 2006. The latest tax breaks for investors and so-called service exporters are a variation on the international banking entity tax breaks passed in the late 1980s. Although they were successful in bringing bank assets to PR (about 30% of all bank assets pertain to int' banking entities), they employ a mere 300 people.

While misdirecting capital to noncompetitive activities (such as high finance), these tax breaks deprive the government of revenue needed to rebuild and improve infrastructure and human capital. They also fortify the false notion that PR can compete in these areas. Neither finance nor manufacturing are our true competitive advantages. Continuing this development model will only demoralize the local population and hasten the Island's economic and fiscal decline.
Posted by David M | Tuesday, May 06 2014 at 10:31PM ET
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