People Keep Bringing Puerto Rico up
Jul. 15th, 2015 03:06 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
walkitoutMy husband, in particular, keeps mentioning it.
Here is Wikipedia on the topic:
https://en.wikipedia.org/wiki/Puerto_Rican_debt_crisis#Triple_tax_exemption
Right there, that's a problem. If the interest payments you make to your creditors are tax free regardless of where the person holding the debt lives, you are for damn sure not going to have trouble selling bonds. And so, apparently, Puerto Rico does: their towns sell debt, the top level of the government sells debt. They use that debt for _operating expenses_, not to do infrastructure like roads, or to get out of a temporary hole because of an economic downturn. The governmental equivalent of buy groceries on credit and only making the minimum payment.
They have a demographic problem also: low birthrate, and because everyone born in Puerto Rico is a US citizen, a lot of them move to the mainland.
I'm sure there are inefficiencies in the government (come on, what government doesn't have waste) and I'm sure there are problems with tax collection (ditto). Maybe even some serious ones (if you can't get income tax collection right in a world where W-2s are available, you are doing something seriously wrong). But I think the real problem here is that holding Puerto Rico debt was just too damn tax advantaged for the good of Puerto Rico.
Here is Wikipedia on the topic:
https://en.wikipedia.org/wiki/Puerto_Rican_debt_crisis#Triple_tax_exemption
Right there, that's a problem. If the interest payments you make to your creditors are tax free regardless of where the person holding the debt lives, you are for damn sure not going to have trouble selling bonds. And so, apparently, Puerto Rico does: their towns sell debt, the top level of the government sells debt. They use that debt for _operating expenses_, not to do infrastructure like roads, or to get out of a temporary hole because of an economic downturn. The governmental equivalent of buy groceries on credit and only making the minimum payment.
They have a demographic problem also: low birthrate, and because everyone born in Puerto Rico is a US citizen, a lot of them move to the mainland.
I'm sure there are inefficiencies in the government (come on, what government doesn't have waste) and I'm sure there are problems with tax collection (ditto). Maybe even some serious ones (if you can't get income tax collection right in a world where W-2s are available, you are doing something seriously wrong). But I think the real problem here is that holding Puerto Rico debt was just too damn tax advantaged for the good of Puerto Rico.