Learn From Puerto Rico's Collapse

So how did Puerto Rico lose its status as one of the richest spots in the Caribbean? Economists cite the decline of its once-powerful manufacturing sector.

Fifty years ago, Puerto Rico relied primarily on exports of coffee, sugar cane, and rum. The tourist industry, of course, brought in revenue as well.

But the island’s biggest boost arguably came in 1976, when Congress effectively exempted Puerto Rico-based companies from paying federal income taxes. The goal was to boost the territory’s economy, and it worked. The tax breaks, coupled with the island’s proximity to the United States, made it a prime destination for multinationals.

Companies lured by low taxes, gentle tropic breezes, and reliably sunny weather made Puerto Rico a mecca of manufacturing. But the boom would be short-lived.

In the 1990s, critics attacked the tax breaks as too expensive. After an intense lobbying battle in 1996, Congress repealed the tax abatement, which was phased out over a decade.

As those tax breaks disappeared, much of Puerto Rico’s tax base disappeared with it. But Puerto Rico’s entitlements and liabilities, which rapidly expanded during the boom years, remained unchanged.

“The effect was immediate and crushing,” says Vélez. “Our economic model was developed around these tax breaks, and after they were allowed to lapse, investment just stopped, and that model just disappeared.”


 

What's the message here, that we should all be exempt from taxes?

TheHawker - What's the message here, that we should all be exempt from taxes?
Low taxes didn't make Puerto Rico successful, low taxes gave Puerto Rico an unfair advantage over competitors.

Remove that advantage and they struggle.

Mark Phone Post 3.0

The moral to this story is when you are on the receiving end of gubment handouts, cling to them as tight as you can. Lobby and buy off as many congressmen as it takes.

Mark Phone Post 3.0

Mark1 -
TheHawker - What's the message here, that we should all be exempt from taxes?
Low taxes didn't make Puerto Rico successful, low taxes gave Puerto Rico an unfair advantage over competitors.

Remove that advantage and they struggle.

Mark Phone Post 3.0
According to the story it seems they were fine before the exemption. Phone Post 3.0

Mark1 -
TheHawker - What's the message here, that we should all be exempt from taxes?
Low taxes didn't make Puerto Rico successful, low taxes gave Puerto Rico an unfair advantage over competitors.

Remove that advantage and they struggle.

Mark Phone Post 3.0
THIS Phone Post 3.0

Z NEDCMK1 - 


Economically the Caribbean Islands were better off before their independence.



 



Post colonial existence has pretty much been a disaster for all of them, just look at Jamaica and Antigua.



 



What was really great was when structural adjustment and the IMF showed up!


^This

Puerto Rico is home to the largest amount of lazy motherfuckers that i know btw.

I'm from there.

Z NEDCMK1 - 


Economically the Caribbean Islands were better off before their independence.



 



Post colonial existence has pretty much been a disaster for all of them, just look at Jamaica and Antigua.



 



What was really great was when structural adjustment and the IMF showed up!


The same could be said for every colonized country in sub-saharan Africa. In fact, is there a single black african country in the world that is better off post-independence?

ttt

Same thing happened to Mexican agriculture after NAFTA. Mexican farmers couldn't compete with subsidized US produce so their agriculture industry was decimated, which led to a huge increase in mexican unemployment and subsequent influx of illegal immigrants into the US.

The lesson has nothing to do with that.   

That is not the point.   That is a side effect..

I have posted.

SlapUsilly -
Z NEDCMK1 - 


Economically the Caribbean Islands were better off before their independence.



 



Post colonial existence has pretty much been a disaster for all of them, just look at Jamaica and Antigua.



 



What was really great was when structural adjustment and the IMF showed up!


^This

Puerto Rico is home to the largest amount of lazy motherfuckers that i know btw.

I'm from there.
Same here. People are lazy and dumb as rocks over there it's crazy. For the guys all they want to become is rappers and women just want to marry someone rich and take care of them. That's why Puerto Rico is failing. Phone Post 3.0

Mark1 - 
TheHawker - What's the message here, that we should all be exempt from taxes?
Low taxes didn't make Puerto Rico successful, low taxes gave Puerto Rico an unfair advantage over competitors.

Remove that advantage and they struggle.

Mark Phone Post 3.0

Why was the advantage unfair?

So liberal policies are the root of the economic demise? Say it isn't so! History is replete is highly prosperous liberally based societies who survive long term.

E kaye forgot to mention you have to listen to the song "Downtown" by Petula Clark to learn the lesson.

Getting to this soon.

Danawhiteshair - 
Mark1 -
TheHawker - What's the message here, that we should all be exempt from taxes?
Low taxes didn't make Puerto Rico successful, low taxes gave Puerto Rico an unfair advantage over competitors.

Remove that advantage and they struggle.

Mark Phone Post 3.0
According to the story it seems they were fine before the exemption. Phone Post 3.0

Correct. Things were fine before the tax breaks.

This is the telling sentance:

"As those tax breaks disappeared, much of Puerto Rico's tax base disappeared with it. But Puerto Rico's entitlements and liabilities, which rapidly expanded during the boom years, remained unchanged."


With the tax breaks there was a boom econemy. Not only did the local PEOPLE thrive, but the local government actually got a hugh revenue INCREASE from the boom econemy created by the tax cuts.

Then the socialists in the local government said "Oooo, look at all this money! Let's give it to people who had nothing to do with earning it."

Then the tax breaks are halted, which halts the boom econemy, which lowers government revenue.

And the expanded social program spending crushes the local government.

LOL, now we are getting there.