Puerto Rico is facing staggering challenges to its economy. Its credit rating was downgraded by Standard & Poor’s on Tuesday. Friday saw more bad news for the island territory’s economy, as Moody’s downgraded their debt to junk status, according to an AP report.
All of this is despite significant efforts on the part of the Puerto Rican government to stop the bleeding.
On top of Puerto Rico’s economic woes, the island is facing an increase in drug-related and violent crime. According to a New York Times report, drug trafficking is one of the few industries showing growth in the US territory.
To make matters worse, Puerto Ricans – particularly educated, professional, middle-class Puerto Ricans – are leaving the island in droves for better opportunities on the mainland.
The island was long viewed as an ideal place for corporations because of significant tax breaks and subsidies. In 1996, manufacturing industries employed 160,000 Puerto Ricans.
Pharmaceutical and textile industries were among the territory’s largest employers. Today, according to a New York Times report, fewer than half of those jobs – around 75,000 – remain in Puerto Rico. So, what’s to blame for Puerto Rico’s economic woes?
Some are blaming rising costs of doing business. In particular, they blame escalating costs of the government-run utilities and rising corporate taxes for Puerto Rico’s downward spiral.
Puerto Rico’s congressional representative, Pedro Pierluisi, a member of the New Progressive Party of Puerto Rico, who caucuses with the Democratic Party, points to recent increases in the corporate tax rate as one of the reasons the Puerto Rican economy is struggling.
The New York Times quotes him as saying: “The new administration has a bookkeeping mentality as opposed to an economic development mentality. Here you find Puerto Rico with an underlying economic problem charging its corporations — its job creators — 39 percent. Hello!”
Small and medium sized businesses are particularly hard hit by new taxes – both the increased corporate tax and especially a new gross receipts tax.
Critics of the new tax complain that the tax is actually higher for business with lower profit margins. Grocery and other food-related businesses are particularly vulnerable.
According to food industry representatives, some stores effectively pay more than 130 percent tax rates – a formula likely to cause more businesses to close their doors while others raise their prices, placing even greater strain on Puerto Ricans’ budgets.
Not everyone has given up hope, however. Puerto Rico’s Governor García Padilla told the New York Times: “I’ve done everything I can to avoid a downgrade. Maybe I can’t detain the winds right now, but I can build the windmills. I am an incurable optimist.”
Of course, Padilla – who was instrumental in the recent tax hikes – also had this to say about winning the governorship in 2012: “I thought about asking for a recount, but now it’s too late.”
What do you think? Will Puerto Rico continue to slide? Are higher taxes and costs of doing business the reason for Puerto Rico’s economic woes?
inquisitr.com
All of this is despite significant efforts on the part of the Puerto Rican government to stop the bleeding.
On top of Puerto Rico’s economic woes, the island is facing an increase in drug-related and violent crime. According to a New York Times report, drug trafficking is one of the few industries showing growth in the US territory.
To make matters worse, Puerto Ricans – particularly educated, professional, middle-class Puerto Ricans – are leaving the island in droves for better opportunities on the mainland.
The island was long viewed as an ideal place for corporations because of significant tax breaks and subsidies. In 1996, manufacturing industries employed 160,000 Puerto Ricans.
Pharmaceutical and textile industries were among the territory’s largest employers. Today, according to a New York Times report, fewer than half of those jobs – around 75,000 – remain in Puerto Rico. So, what’s to blame for Puerto Rico’s economic woes?
Some are blaming rising costs of doing business. In particular, they blame escalating costs of the government-run utilities and rising corporate taxes for Puerto Rico’s downward spiral.
Puerto Rico’s congressional representative, Pedro Pierluisi, a member of the New Progressive Party of Puerto Rico, who caucuses with the Democratic Party, points to recent increases in the corporate tax rate as one of the reasons the Puerto Rican economy is struggling.
The New York Times quotes him as saying: “The new administration has a bookkeeping mentality as opposed to an economic development mentality. Here you find Puerto Rico with an underlying economic problem charging its corporations — its job creators — 39 percent. Hello!”
Small and medium sized businesses are particularly hard hit by new taxes – both the increased corporate tax and especially a new gross receipts tax.
Critics of the new tax complain that the tax is actually higher for business with lower profit margins. Grocery and other food-related businesses are particularly vulnerable.
According to food industry representatives, some stores effectively pay more than 130 percent tax rates – a formula likely to cause more businesses to close their doors while others raise their prices, placing even greater strain on Puerto Ricans’ budgets.
Not everyone has given up hope, however. Puerto Rico’s Governor García Padilla told the New York Times: “I’ve done everything I can to avoid a downgrade. Maybe I can’t detain the winds right now, but I can build the windmills. I am an incurable optimist.”
Of course, Padilla – who was instrumental in the recent tax hikes – also had this to say about winning the governorship in 2012: “I thought about asking for a recount, but now it’s too late.”
What do you think? Will Puerto Rico continue to slide? Are higher taxes and costs of doing business the reason for Puerto Rico’s economic woes?
inquisitr.com
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