Puerto Rico Gov. Anibal Acevedo Vila last week announced that, if re-elected, he plans to eliminate income taxes for residents earning $30,000 or less and continue two key initiatives: entering Puerto Rico’s lottery system into a concession agreement and decreasing the island’s sales tax to 2.5% from 7%.

Under the governor’s tax-break proposal, residents in the lower tax brackets would not be required to file a tax return, with individuals making $30,000 or less and households earning $60,000 or less free from taxation. Those earners account for 70% of the commonwealth’s tax base of roughly one million, according to Alfredo Salazar, who is running alongside Acevedo Vila on the Popular Democratic Party ticket for resident commissioner, Puerto Rico’s non-voting congressional representative. Salazar is the former acting president of the Government Development Bank for Puerto Rico, the island’s financial adviser.

Officials anticipate the tax-break initiative to cost the government $1 billion over three years. To support that program, Salazar said the tax break could stimulate spending and boost corporate income taxes, which would offset the decrease in personal-income tax revenue. In addition, the proposed long-term lease of the lottery system, which officials estimate could generate up to $3 billion, would be a back-up source of revenue if the increase in business tax revenues falls short.

The current resident commissioner, Luis Fortuno, is running for governor on the New Progressive Party ticket with former Secretary of Justice Pedro Pierluisi looking to gain Fortuno’s congressional seat.

Salazar said the governor’s tax-break announcement is not a political ploy to win over more supporters before the general elections in November.

“This idea has been kicked around for a long time,” he said. “We have just not had the ability to provide a safety net.”

Acevedo Vila will continue to push slashing the island’s 7% sales tax to 2.5% and replacing that revenue with a revamped 6.6% excise tax, Salazar said. Of the sales tax revenue stream, 1% backs $2.6 billion of sales tax revenue bonds.

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