By Roberta Rampton
WASHINGTON (Reuters) – Puerto Rican officials and mayors paid last-minute visits to Capitol Hill on Wednesday to urge lawmakers to shield the island from a tax proposal they say could destroy 75,000 jobs and wipe out a third of its tax base.
As congressional Republicans said they had a reached a deal on an overhaul of tax rates, Puerto Ricans said the bill could decimate its economy as the bankrupt territory tries to recover from Hurricane Maria.
“This would be worse than Maria,” Luis Rivera Marin, Puerto Rico’s secretary of state, told Reuters.
Initial versions of the tax bill passed by the U.S. House of Representatives and Senate proposed taxing U.S. companies on foreign earnings. Puerto Rico – an American territory whose 3.4 million residents are American citizens – is considered a foreign jurisdiction for tax purposes.
Without an exemption from the new foreign earnings tax, drug and medical device makers that are the mainstay of the island’s economy would likely leave the territory, taking away jobs and prompting more Puerto Ricans to leave for the mainland, Rivera Marin said.
Failing to grant an exemption would fly in the face of recommendations made by a bipartisan congressional task force just one year ago that Puerto Rico not be “relegated to an afterthought” in tax reform legislation, he said.
“That’s the promise. What did Congress do? The House left us out, the Senate left us out,” Rivera Marin said.
SEEKING CARVE-OUT
The top lines of the emerging deal on the joint bill began to emerge on Wednesday, but the finer details – including whether it included an accommodation for Puerto Rico – were unlikely to be clear until Friday.
The top Republican tax writer in the U.S. House of Representatives told reporters that the bill’s treatment of foreign companies was still under discussion.
“Part of the overall efforts of international reform here affect Puerto Rico, and we hope will drive investment back towards the U.S. and our territories,” said Kevin Brady, chairman of the House Ways and Means Committee.
A spokeswoman said no further details were immediately available.
Spokespersons for the Senate Finance Committee and the White House did not immediately respond to requests for comment on the issue.
Before the hurricane hit, Puerto Rico was struggling with $72 billion in debt. Its finances were put under federal control last year.
Introducing taxes on multinational companies in Puerto Rico would mean more uncertainty for the island, a creditor source said, expressing support for the territorial government’s argument for a carve out in the bill.
MINI-GRID PLAN
The tax battle comes as Puerto Rico wrangles with a failed power grid and other infrastructure wrecked when Hurricane Maria passed across the island in September.
Puerto Rico has requested a total of $94.4 billion in aid, including $31.1 billion for housing and $17.8 billion to rebuild its ruined power grid.
While in Washington, Rivera Marin met with administration officials and private sector companies working to develop a new system of “mini-grids” using mainly renewable energy to replace the antiquated power system on the island.
“We need to fix it, and there’s consensus from all the technical experts that have been looking into this on the solution,” he said.
The territorial government also faces a near-term crisis in paying for Medicaid for its poorest residents. Rivera Marin said he is hopeful that the year-end government spending bill will include some Medicaid assistance.
Source: Investing.com
