Puerto Rico

One provision buried deep inside the hundreds of pages that make up the Republican tax bill is a cruel tax hike that punishes Puerto Rico.

Approximately three months after devastating category 5 hurricanes Irma and Maria completely decimated Puerto Rico and its infrastructure, many of the 3.5 million people living in the U.S. territory are still without power, clean drinking water, and other basic necessities. While several dozen Americans died in the wake of Hurricane Maria, the death toll from the poor response by the U.S. government is more than 1,000.

However, despite grappling with their community slowly rebuilding from nothing, the tax bill just passed by the U.S. Senate and expected to be passed by the House this week makes Puerto Rico’s ongoing catastrophe even worse. HuffPost reported that American companies operating in Puerto Rico will now see an additional 12.5 percent tax on intellectual property income, and a 10 percent tax on profits generated in Puerto Rico.

This tax hike is based on a well-intentioned provision aimed at punishing U.S. companies that operate in overseas tax havens. However, because the federal tax code treats Puerto Rico like a foreign tax haven rather than a U.S. territory, companies with operations on the island are subject to an additional tax increase. The new taxes are coming while the island is simultaneously struggling with a $70 billion debt burden — largely due to NAFTA and former House Speaker Newt Gingrich’s repeal of tax breaks for businesses operating in Puerto Rico.

Even though the Senate passed a $36.5 billion aid bill ($18.7 billion for FEMA’s disaster relief efforts, $16 billion for the flood insurance program) for Puerto Rico in November, the governor of the territory requested $94.4 billion, saying the island’s schools, hospitals, housing, and roads all need to be completely rebuilt due to the damage caused by Hurricane Maria.

You can view the number of Americans without power, water, and other infrastructure on status.pr, which gives continuous updates on the recovery status of Puerto Rico.


Matthew P. Robbins is a freelance economics contributor covering wages, budgets, and taxes. He lives in Chicago, Illinois with his husband and two cats. 

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