Puerto Rico Tax Incentives - Defending Act 60

Acts 20 and 22 of Puerto Rico are a hotly debated topic between those for and against U.S. intervention. Puerto Rico has been winning the race to the bottom. Now, the U.S. and other wealthy countries want to call off the race. Welcome back to Taking Shelter with Peter Palsen.

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Chapters:
0:00 – Intro
1:00 – The Race to the Bottom
2:45 – Treasure Islands
3:45 – Four Challenges
4:10 – IRS Enforcement Activity
5:55 – Legislative Change in Puerto Rico
8:00 – Legislative Change in the Unites States
10:00 – Possible Statehood
11:00 – Puerto Rico’s Political Future: A Divisive Issue with Many Dimensions
12:00 - Outro

Resources:
Puerto Rican Statehood: https://youtu.be/kvgokeVNVdw
Act 20 & 22: https://www.the2022actsociety.org/
Act 22 Video: https://youtu.be/ffOAm3qsif4
Section 933: https://www.irs.gov/pub/irs-pdf/p1321.pdf
Puerto Rico’s Political Future: A Divisive Issue with Many Dimensions: https://www.gao.gov/products/ggd-81-48

Tax incentives are critical to the health of the Puerto Rican economy. It is not just Act 20 and 22 but also incentives focused on maintaining employment of some of the largest companies in the world doing business in Puerto Rico. And on a smaller scale, there are incentives to maintain a supply of critical medical and other services on the island, considering the continued outflow of skilled workers to the mainland.

The race to the bottom is a term used by Janet Yellen and other officials to support the global minimum tax efforts I discussed in my statehood video. Basically, the idea is to have every company pay a tax of not less than around 15% or 21% regardless of where they do business. The idea is that the home country tops up the tax if the local rate is less than the target.

How does Puerto Rico’s collected tax rate compare to these target rates? The U.S. IRS recently released a summary of information it collects from large U.S. companies about their global footprints. Based on the latest available data, these big U.S. companies reported having around 73,000 jobs in Puerto Rico and paying an effective rate of cash tax to Puerto Rico of 1.6%. If you toss out island nations that don’t have income taxes (like the Cayman Islands and Bermuda), Puerto Rico is the clear winner of the race to the bottom.

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DISCLAIMER: This video is not legal, tax, or financial advice. Talk with a professional about your situation before making any legal or financial decisions. These videos also do not create attorney-client privilege.

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