Squo tax laws enforce inequality and colonialism on Puerto Rico, changing the tax code is key

This is not a new issue. “Stop Letting the Rich Move to Puerto Rico as a Tax Haven,” a 2015 New York Times headline read, in an op-ed written by tax lawyer Edward Kleinbard, who also served as the chief of staff of Congress’ Joint Committee on Taxation. “With no U.S. or Puerto Rican tax on much investment income of new residents, U.S. citizens now can pay zero tax on capital gains,” he said, decrying the influx of tech billionaires who exploit the island.

Depriving the territory of this potentially taxable income inhibits investments in public goods. There is less money to invest in things like infrastructure, meaning inadequately built roads and bridges are easily decimated by storms, cutting locals off from rescue efforts. Puerto Rico’s financial crisis is precisely what made it so vulnerable to the partial privatization of its electric grid, which started failing long before Fiona hit the island and has intensified the storm’s damage (around half of the island, or 1.47 million people, still had no power as of Saturday). Crucially, inequality makes recovery efforts harder. Natural disasters make inequality worse, too, according to numerous studies.

Puerto Ricans who object to the tax laws say that it only widens colonial-style inequities and worry it might also distort local politics, as tax evaders on the island are eligible to vote and may well vote in their own interests, such as trying to prevent Puerto Rico from gaining statehood (and therefore ending the tax-haven gravy train).

“It is in these past years of tax havens and inaccessible incentives for natives that have strengthened and upheld colonialism,” Alexandra-Marie Figueroa told Time in 2021. She works with Taller Salud, a feminist organization in Puerto Rico, which has been openly critical of these tax laws. They were “crafted behind closed doors to make Puerto Rico a paradise for those that barge in and can afford it, but a life-sentence for those of us who try to hold on to what we have left of our country,” said Figueroa.

High levels of inequality are precisely what has contributed to the devastation in Puerto Rico in the first place. In order for it to recover, in as much as it can, and to minimize the impact of future natural disasters, tackling inequality must be a policy priority. It starts by changing the tax laws.