New Incentives in Puerto Rico Brings Rich People as Middle Class Flees
Puerto Rico is inviting rich United States citizens to move to the island and live without paying taxes on capital gains.
Nearly 250 people have accepted Puerto Rico's offer thus far, Associated Press reported. The island is trying to bring large investors in hopes that they would buy expensive real estate, develop businesses and create jobs.
Legislation in Puerto Rico exempt people from paying taxes on any capital gains they make after relocating to the country. If they take up permanent residence, they are exempted from local taxes on dividends and interests.
"Frankly, for Americans, it's sort of an unprecedented thing," said Alex Daley, a technology investment strategist who moved from Vermont with his wife in December 2013.
"They try to hold the people with the most mobility and the most wealth captive," Daley said of the U.S. government. "People are getting angry about that."
Economists say the new residents will not rescue Puerto Rico from its economic issues adding that it would be smarter to focus on broadening the tax base.
"Instead, Puerto Rico spends a lot of time and effort to attract a sub-population that wants special treatment and is seeking to avoid paying taxes on the mainland," said Barry Bosworth, an economist with the Brookings Institution in Washington. "It gives the appearance of being for sale."
A report from the Standard and Poor states, "If Puerto Rico becomes too successful at marketing itself as a tax haven, the U.S. Congress in our view would likely enact restrictions."
Lawyers and tax experts in Puerto Rico say they get calls every day from people looking to move, including managers of hedge funds who make most of their money from capital gains, which are taxed at 23.8 percent in the United States.
Puerto Rico has a 13 percent unemployment rate, which is double the rate in the U.S.
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