Will Kamala Harris and fellow Democrats have to make Puerto Rico a state before implementing their new taxes?
Kamala Harris has big dreams for what rich people can do for the U.S. Treasury via new taxes and higher tax rates (see The Harris unrealized capital gains tax and Bidenflation and Unrealized capital gains are already taxed by the federal government… for example).
The typical American of means, however, can already escape federal taxation by moving to Puerto Rico. “How Puerto Rico Became the Newest Tax Haven for the Super Rich” (GQ):
In 2012, Puerto Rico had passed two laws intended to make the island a “global investment destination.” Act 20 allows corporations that export services from the island to pay only 4 percent tax. Act 22 goes much further: It makes Puerto Rico the only place on U.S. soil where personal income from capital gains, interest, and dividends are untaxed.
The last big tweak to U.S. taxation was in 2018. Plainly, the rates were low enough that most rich Americans refrained from making the move to the Ritz-Carlton Dorado. But what if Kamala Harris and fellow Democrats are able to deliver on their promise to soak the rich? Wouldn’t there be a lot more rich people who would make the move for 183 days per year in order to avoid losing a big percentage of their wealth? If so, the only way to stop the erosion of expected tax base would be to eliminate Puerto Rico’s ability to offer Act 22 treatment and the only way that I know to strip Puerto Rico of its tax sovereignty is to make Puerto Rico a state.
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