First things first — let me make this point abundantly clear — I have always favored statehood for Puerto Rico and I believe the island should be a state. Puerto Ricans deserve adequate benefits, voting representation in Congress and should vote for the President.
With that said, I vehemently oppose efforts by any group, lobbyist or political leader to strike or derail incentives for Puerto Rico, sheltering their argument in the ransacked shack that implies that supporting statehood is inconsistent with supporting tax incentives for the island. That makes as much sense as getting rid of your old car because it’s too beat up, before saving for a down payment on a new ride. You’re going to end up walking, Genius!
Our government must try to understand Washington and listen to the happenings inside the beltway. The Trump administration has expressed concern with the need and shortage of medical supplies, and has instructed agencies to move to U.S. sources when possible. Members of Congress have introduced several bills that stress this very point.
Washington is focusing on manufacturing reshoring, and rightly so. The United States needs to ensure that it is prepared to face local, national and global emergencies like the one we are facing.
However, let’s be clear, a write-off of investment property or credits for operating in a depressed zone won’t lure enough companies to make a dent in our economy. While immediate write-offs of investment property are convenient, they are not enticing. Revisiting GILTI rules applicable to CFCs on the other hand, is the path the U.S. must follow to reach its goal.
Congresswoman Stacey Plaskett (D-USVI) recently introduced H.R. 6648, The Territorial Economic Recovery Act. The bill aims to ensure the economic recovery of U.S. territories during uncertain times.
The bill amends the U.S. Internal Revenue Code to exclude income effectively connected with the active conduct of a trade or business in a U.S. possession from tax, which otherwise would be considered global intangible low taxed income (GILTI). This simple change requires a controlled foreign corporation (CFC) to meet certain criteria related with active business requirement to avoid abuses, but simple enough to provide a desperately needed boost to new investment.
Basically, the bill effectively positions the territories to fill a manufacturing gap that addresses the need for U.S.-made goods, while at the same time fostering high-paying skilled jobs in the territories.
H.R. 6648 not only makes sense, it is the prudent and reasonable approach to the immediate challenges faced by U.S. territories, while also offering the talent and resources we have to serve our great nation. If Plaskett’s bill is approved, it could represent a significant revival to the economies of U.S. territories.
Election year politicking aside, some will argue that manufacturing companies don’t provide enough jobs or that the taxes collected don’t offset the benefits they are given. The reality is that the economic trickle-down effect is such that they justify the very existence of small businesses throughout the island.
These manufacturers require services from local companies from car dealerships to food distributors, logistics, laboratories and private security companies to name a few. Better yet, ask the mayors where some of these manufacturers operate, what they would do if they were to lose this presence.
A recent article in The Hill, titled “Puerto Rico is shovel-ready for the COVID-19 recovery” highlights Puerto Rico’s need for incentives and ties it to the need for strengthening the production of medical supplies in the U.S. The article describes federal incentives during Operation Bootstrap and the evolution of the island’s economy. Puerto Rico has endured a lot, but it retains talent, infrastructure and vast experience in manufacturing.
If our leaders want to sell the idea that some miraculous solution will be born in Washington, we are in trouble. Business development and industry on the island must be nurtured, and our leaders know that. The status debate, the considerations before Congress and the legitimate debate of our future have a place and time. It’s OK to have that debate.
However, we cannot continue to sacrifice generations of young Puerto Ricans to push the misconceived notion that improving conditions under our current status and ensuring Puerto Rican quality of life now, is inconsistent with petitioning a different political future. If this notion were correct, how do they explain the rum cover over, maritime cabotage laws and other federal laws that address the island differently?
Our young generations need us. Let’s step up our game and show them the respect they deserve. The question is if our leaders are willing to foster that economic growth now.
