This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Puerto Rico's Tax Pitch

Another consideration: Should Puerto Rico become a state, the exemption would likely end. Given the territory's late-2012 nonbinding referendum on statehood showed 61% of Puerto Ricans support the idea, that might not be as far-fetched as it seems. And tax policy frequently shifts -- so this policy may come to an end the moment a different administration takes the reins in San Juan or if this proves politically unpalatable for other reasons.

For example, while lowering its corporate tax rate a la Ireland isn't in the cards legally today, this wasn't always the case. To combat unemployment and poverty on the island in the 1960s, the federal government used various tax incentives to lure U.S. manufacturing operations there. In 1976, Congress added a tax credit that effectively exempted profits U.S. companies attributed to Puerto Rico.

The combination of a tax credit, incentives, the proximity to the U.S. and available industrial sites prompted many U.S. companies to flock to the island. However, a 1993 law cut the full exemption to 40%, and a 1996 law phased out the tax break over a 10-year period. By 2006, many multinationals in Puerto Rico shuttered their operations.

Whether San Juan gets a big return on this move is anyone's guess -- and we wonder why, if they want to truly compete, they don't just enact a flatter, simpler taxes across the board. But either way, attempting to recruit business to the island is clearly a sensible aim and taxes are powerful incentives. In that sense, the proposal seems headed for the right target.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $126.44 -0.13%
FB $87.28 0.43%
GOOG $523.40 0.30%
TSLA $280.02 4.04%
YHOO $39.38 0.13%

Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs