Posted on 08/07/2015 9:27:38 AM PDT by SeekAndFind
Puerto Rico is $72 billion in debt, and it will take a painful process to bring the island's finances back from the brink.
It's a massive debt load for such a small territory, and the problem can really be traced to one issue — bad tax policy.
After Puerto Rico let one tax break for manufacturers expire almost a decade ago, manufacturers started shutting down operations on the island. That caused a spike in unemployment.
On top of that, business-friendly tax policies for some of the companies that remained allowed multinational giants to pay tax rates of little more than 1%.
Plus, Puerto Rico's large underground economy meant the island also struggled to collect taxes from some of its citizens.
With revenue slowing, Puerto Rico decided to raise billions in debt to finance its government operations. Investors were willing to loan Puerto Rico money, despite the economic warning signs, because it offered high yields, and the island's bonds had attractive tax breaks.
"The tax system in Puerto Rico is very regressive," debt expert Larry McDonald of Newedge told Business Insider recently. He has been investing in its debt since 2013 and started warning about the island's precarious situation last year.
"The population is down by 1 million people," he said. "All the talent left the island because of really bad government policy."
The exodus started back in 2006, when a tax break for manufacturers who set up shop on the island was allowed to expire. Employment fell around 10 percentage points between 2006 and 2010, according to a report by the New York Federal Reserve.
(Excerpt) Read more at businessinsider.com ...
Wrong! It’s called WELFARE...giving people someone elses money.
Time to make cash transactions illegal. /Statists
Another textbook example of Democrat policies in action.
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