Politic365

 
 


Grito

12:44pm June 11, 2013

Puerto Rico Resorts to Taxes and Gambling to Avert Budget Crisis

poker1

As Puerto Rico’s fiscal year comes to a close, Governor Garcia’s Padilla’s party (Popular Democratic Party, or PPD in Spanish) is facing close to an $800 million dollar deficit and no easy way to close it. The current crisis is due to the result of decades of borrowing that have left Puerto Rico unable to refinance any more of its debt, coupled with $775 million dollars in debt payments knocking on the door. With the true owners of Puerto Rico (the Credit Agencies) threatening to downgrade Puerto Rico bonds to junk status, a four year old economic report has been leaked to the press about what would happen if such a downgrade occurred. In short, the report commissioned by then Governor Luis Fortuño and produced by Advantage Business Consulting in 2009, stated that a junk-level downgrade would result in 60,000 public employees being laid off and a sales tax of 18% (up from 7% now) to balance the budget.

This dire panaroma plays side-by-side with Puerto Rico’s poor economy, leaving many wondering if the Island’s economy will ever recover. One such analist, Cate Long, posed this question in a recent article, adding:

“The GDB is currently rated Baa3. It could be downgraded to junk and see its borrowing costs soar. The government intends to raise taxes on corporations to help with the massive public deficit, and banks are lending at a lower level, both of which can inhabit private sector growth. What will provide growth for Puerto Rico and allow the commonwealth’s $58 billion of tax-supported debt to be serviced?”

Facing a shrinking economy, stagnant job creation, increased migration to the Continental United States and low wages, Governor Garcia Padilla’s party is investing in two main solutions: Gambling and taxes. On the gambling side, the Government plans on offering doubling certain lottery games in hopes of raising $35 million dollars in income.  Puerto Rico is already one of the few U.S. jurisdictions in which casinos are legal and numerous, with several state lottery games being used to increase state income. The new move, going into effect this month, will seek to continue tapping the Island’s growing gambling problem to make a slight dent in the deficit.

On the taxing side, the PPD is planning on expanding the current sales tax into a business to business tax by applying it to the entire commercial chain. Similar to a value added tax, the proposal would expand the 7% sales tax to the entire distribution chain. Local business associations have fiercely rejected the idea, claiming it would kill a barely surviving economy. Governor Garcia Padilla has proposed a trade-off in the manner of a .05% reduction in the sales tax, a move that satisfies no one. Additional tax options include increase the tobacco tax, imposing an Island-wide business permit tax (“patente” in Spanish), and filing civil lawsuits against ordinary citizens who owe taxes to the Island’s tax department.

The short term solution proposed by the Government would only impact the economy more without providing for a long term solution. Miguel Soto, of the Center for the New Economy, aptly summarized Puerto Rico’s eternal spending problem in a recent article published on News is my Business, adding:

“We’re running out of flexibility to cover that gap. We have to make a decision as a country: if we want world-class services and education, we have to pay for them. If we can not spend on that, then we have to make adjustments… You can’t buy a Ferrari with the money you have set aside for a Toyota, you’re just not going to have enough.”

Soto’s description hits the nail given that Governor Garcia Padilla is proposing more gambling and more taxes, but no real cuts in the massive government spending. The PPD would hardly move to raise tuition rates at the public university or stand a hard line against unions for lower wages in the public sector, just like it will not cut the ever growing government healthcare program which has run the Department of Health into the red since its beginning in the ’90s.

With a prescription of more taxes and less growth, one has to wonder if the Island’s economy will ever recover, or if we will end up doubling Japan’s lost decade.



About the Author

jeanvidal





 
 

 
HRC1

July 31: Hillary Clinton to Speak at National Urban League Conference

On July 31, former Secretary of State Hillary Clinton will address the National Urban League in Fort Lauderdale, Fl. at their annual conference.  So far in the early 2016 campaign for the White House, Clinton has been vocal a...
by Lauren Victoria Burke
0

 
 
box

Black Unemployment Rate Falls to 9.5% in June from Double Digits in May

Black unemployment drops to 9.5%.  It was 10.4 percent in December 2014 and 10.2 percent in May of 2015 but now Black unemployment is at 9.5 percent for June, according to the Department of Labor. The overall jobless rate for ...
by Lauren Victoria Burke
0

 
 
5440604654_42e18de586_b

Macy’s severs ties to Donald Trump over anti-Mexican remarks

Macy’s department store became the latest business to disassociate itself from GOP presidential candidate and real estate mogul Donald Trump over his anti-Mexican comments. A few weeks ago in making his announcement as a ...
by Adriana Maestas
0

 

Advertisement
 
koch

This is What it Sounds Like When the Koch Brothers Support Justice Reform

Think of the famous motto of the Black Caucus, “no permanent enemies only permanent interests,” as you think of the Koch Brothers supporting a criminal justice reform bill that rolls back over criminalization.  It ...
by Lauren Victoria Burke
1

 
 
fire3

5 Recent Black Church Arsons in SC, NC, GA, TN, FL

In the wake of the racist murders of nine members of the Emanuel AME Church in Charleston, South Carolina on June 16,  there have been five arsons of Black churches in the South.  There is a long history in America regarding ...
by Lauren Victoria Burke
1

 




One Comment


  1. Thhe point of this is that you do not want to remove them from the spatiazl reality that has been established in
    tthe primaqry direct cinema moments. Our trade show booth design has provided leading companies with the top solutions
    for their conference, trade show and publkic event requirements for years.
    A series oof operations may be required to sculpt and position
    the new breasts, install necessary channels foor drainage aand correct any
    complications that may occur subsequent to the reconstructive process.



Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>