Puerto Rico warns tax bill could slash revenue by one third
Still reeling from the devastation of Hurricane Maria, Puerto Rico may be pummeled again by the tax-cut bill in Congress.
Puerto Rico’s Treasury Secretary warned the island’s federal oversight board that the government could lose as much one third of its revenue if Congress approves a 20 percent excise tax on goods produced there as a part of the federal overhaul. Puerto Rico is already bankrupt and contending with as much as $100 billion of damage left by the September storm.
“This is critical and might be another catalyst for Puerto Rico,” Raul Maldonado, the secretary, said in a letter to the board that was read Tuesday at its meeting in New York.
Congressional negotiators may be open to stripping the provision from the final version of the bill. Representative Kevin Brady, the chairman of the House Ways and Means Committee, said lawmakers want to use the legislation to help Puerto Rico and are still considering ways to do so.
“In a general way, we want to do more for Puerto Rico,” he told reporters Tuesday.
Puerto Rico’s leaders previously said that if the House tax bill passes as written it could devastate the finances of the government, which is already engaged in a record-setting bankruptcy to shed some of its $74 billion debt. That collapse was brought on by years of recession as residents moved to the U.S. mainland for work, a trend that was worsened by the hurricane. Puerto Rico’s most actively traded bonds have lost nearly two-thirds of their value since September, dropping to about 22 cents on the dollar.
Even though Puerto Rico is a U.S. territory, subsidiaries based there are currently considered foreign for federal tax purposes. That has turned the Caribbean island into a manufacturing powerhouse for U.S. companies, with pharmaceutical manufacturing alone providing up to a third of Puerto Rico’s tax revenues.
Officials on the island say imposing the excise tax would undermine Puerto Rico’s ability to keep manufacturing from shifting to countries like Ireland and Singapore.
Puerto Rico is lobbying to keep the change out of the final bill that’s being hashed out by House and Senate negotiators. Manuel Laboy, the commonwealth’s Secretary of Economic Development, said Monday in an interview that he and administration officials are working with Resident Commissioner Jenniffer Gonzalez, the island’s representative in Congress, to persuade lawmakers to alter the tax plan.
“There’s an indication that some sort of an amendment will be included,” Laboy said.
Brady, who will also serve as conference chairman as the House and Senate bills are reconciled, said he and other members continue to meet with Gonzalez and his fellow Republicans about the island’s treatment in the legislation.
“We haven’t come to a final decision yet, but we are exploring options,” he said.