Mainland U.S. residents who are not Puerto Rican rarely pay attention to the politics of the island. If there is a hurricane, or some other natural disaster there, media will cover it, but soon enough, the coverage fades.
So it’s up to us “not-Boricuas” to pay attention and speak out against policies and laws that are negatively impacting Puerto Ricans. We must join their voices and amplify their cries for justice.
One key law enacted in Puerto Rico that is having a disastrous impact on Puerto Rican islanders is Act 22, which is now a part of Act 60. Puerto Ricans need our help to get this tax haven scam repealed by the U.S. Congress, where they only have a nonvoting representative.
RELATED STORY: The wealthy given outrageous incentives to colonize Puerto Rico while native residents suffer
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Back in November, Alberto Medina, president of Boricuas Unidos en la Diáspora, wrote an opinion piece about Act 22/60 for The Hill.
Tax cheats are taking advantage of Puerto Rico — the US government can stop them
Thousands of ultrarich individuals are in Puerto Rico thanks to Act 22 (now folded into a broader law known as Act 60), a local law that allows non-Puerto Ricans to pay zero tax on passive income from interest and dividends or capital gains. The theory was that these individuals would invest, create jobs and help prop up a Puerto Rican economy in the midst of a decades-long crisis despite the law having no actual investment or job creation requirements.
The reality has been far different.
An in-depth study by Puerto Rico’s Center for Investigative Journalism found that the tax incentives have failed to spur meaningful economic growth. Instead, they are exacerbating Puerto Rico’s economic troubles. The housing crisis on the island that began after Hurricane Maria has also accelerated as Act 22 beneficiaries displaced locals to acquire properties, driving up home prices.
Puerto Ricans, who cannot keep up with the buying power of these tax-evading millionaires, increasingly find themselves without access to housing. The downstream effects are troubling; for example, Puerto Rican nonprofits recently announced that they’re having trouble finding transitional housing for domestic violence survivors.
And as Daily Kos noted in December 2021:
A lot of these wealthy investors are now living it up on the lush beaches of Puerto Rico with the explicit purpose of avoiding their own taxes, while turning the best real estate of the island into their own personal playgrounds.
John Paulson, a hedge fund billionaire, announced he was moving to Puerto Rico at a conference in Manhattan, and was blunt as to why: “It’s the only place a U.S. citizen can go and literally avoid, legally, all their taxes.”
Mark Gold, founder of the heavily investigated Ticket Clinic, put it this way at a Cocktails and Compliance party that new wealthy residents throw for themselves every year:
“I was looking at different tax havens. Andorra, Lichtenstein, Monaco. But the problem is, you have to give up your U.S. passport,” Gold told partygoers.
“When I heard about this, it was too good to be true. But it’s real. I live in paradise. I live at the Ritz-Carlton. I drive my golf cart to the beach club for breakfast. Then I go to my sunset yoga class on the beach.”
Critics of the acts point out the island is still, almost 10 years later, mired in poverty and unemployment. Meanwhile, the inequality gap has exploded. Puerto Rico now has the highest inequality gap in the United States, which is saying a lot since the U.S. already has the highest income inequality in the Western world. Economically struggling native Puerto Ricans are justifiably livid that they are not being exempted from any tax burden while they are essentially being forced to subsidize their new super-wealthy neighbors.
For an in-depth look into the damage to Puerto Ricans under the continuation of the act, Losing Puerto Rico—described as “a media project aimed to broaden the narratives around the multiple crises facing Puerto Rico and Boricuas by inviting action targeted towards those who have power to make immediate change”—has a great series of videos explaining the history and its impact.
Losing Puerto Rico is a video project aimed to educate, inspire and activate Boricuas in Puerto Rico and in the diaspora – as well as activists on the mainland United States. Many of the crises Puerto Rico faces are not new and are a manifestation of root issues inflicted on the island by the United States government.
The most recent video is only five minutes long. Please take the time to watch it.
The video also has informative, detailed video notes, shared in full with permission.
Did you know that wealthy people are able to evade most taxes if they move to Puerto Rico? Did you know Puerto Rico is the only place in the world where Americans can move and not pay federal income taxes, without giving up their US passports? Is your community or state being deprived of tax dollars to fund public services while these millionaires get to pack up and leave to live tax free in the Caribbean? Is this hurting or helping local communities in Puerto Rico? Have you heard of Puerto Rico’s displacement and how this has made it much harder to rebuild after historic natural disasters and financial crisis? Were you aware that crypto investors are exploiting Puerto Rico and making it much harder for average Puerto Ricans to live in their own island nation? As a US colony, Puerto Rico is already at a disadvantage – rich outsiders from the states are making it that much harder.
Why this impacts me?
If you live in one of the 50 states or Washington, DC, rich people from your community may be moving to Puerto Rico to exploit extraordinary tax loopholes – where they can not only evade most US taxes, but Puerto Rican taxes as well. When the rich move their residence to tax havens, they deprive your state and local government of the tax revenues needed for your public services. Ironically, the bankrupt US territory of Puerto Rico is also deprived of essential services under this scheme. If you are a boricua* in the diaspora and have loved ones on the island, chances are they live in communities where many are being priced out by outsiders not paying their fair share.
What is happening and who is to blame?
Rich outsiders from the US are moving to Puerto Rico and causing the displacement of Puerto Ricans due to tax loopholes not available to Americans anywhere else on the planet. One particular loophole, PR Act 22, is only available to outsiders, not local Puerto Ricans. You may have seen the crypto community advocating to move to Puerto Rico for tax breaks through well known influencers like Logan Paul. Locals have voiced outrage at their audacious evangelizing, labeling them “crypto colonizers.”
What does change look like?
Our goal is to repeal the Puerto Rican law that invites Americans to move to the island and pay zero US federal income taxes and close to zero Puerto Rican taxes. The repeal can happen if Congress decides to no longer allow Americans that move to the island to avoid paying federal taxes, or if the Puerto Rican legislature passes a law revoking Act 22 (now part of Act 60).
Background on displacement crisis
Puerto Rico has been suffering an economic crisis since 2006 that, along with a series of natural disasters of epic proportions, have destroyed the island’s infrastructure and caused massive migration. More than 200,000 Puerto Ricans have left the island. And a lack of jobs, housing insecurity, increased cost of living and difficult daily life due to an energy crisis, have made normal life almost impossible.
The Cause
In 2011, Act 22 was enacted to attract investors to Puerto Rico, hailed as a way to reinvigorate the island which was dealing with multiple crises. But it has had the opposite effect, causing a crisis of displacement. Act 22 allows anyone who has not lived in Puerto Rico for seven years to move to the island and pay ZERO American income taxes and close to ZERO Puerto Rican taxes. They only have to live there part of the year and buy a residence. This has attracted millionaires and billionaires seeking to evade taxes. The result: skyrocketing rent and property values that make it impossible for many boricuas to live in their own island-nation. And Puerto Rico is at risk of losing its identity and culture to outsiders with no connection to the island.
Last year, Losing Puerto Rico looked into the false promises made to Puerto Ricans by crypto-tycoons like Brock Pierce, in a video clocking under six minutes.
In November 2023, New York Rep. Nydia Velázquez and a dozen of her House colleagues issued a scathing press release about Act 22.
Velázquez Leads 12 Members Requesting Information on Act 22 Tax Evaders in Puerto Rico
Today, Rep. Nydia M. Velázquez (D-NY) led 12 members in sending a letter to the Internal Revenue Service (IRS) raising concerns about a Puerto Rico law that is enabling tax evasion by the American wealthy, and asking the IRS to expedite a Freedom of Information Act (FOIA) request submitted by a coalition of Puerto Rican and U.S advocacy groups regarding the agency’s efforts to identify and address noncompliance with this law.
Puerto Rico’s Act 22 (now part of Act 60 of 2019) seeks to attract wealthy foreigners and mainlanders to Puerto Rico by offering generous tax-related benefits. For instance, beneficiaries do not have to pay federal income taxes on PR-source income and can avoid paying any taxes on interests, dividends, and capital gains.
In 2021, the IRS initiated a campaign against Act 22 beneficiaries focused on U.S. taxpayers who may have inaccurately claimed benefits without meeting the law residency requirements. However, the IRS has not released detailed information to the public regarding these efforts.
Since the law’s enactment in 2012, over 5,000 wealthy individuals have relocated to Puerto Rico, mainly from the United States. Research has found that cash property sales have grown exponentially, and short-term rentals have rapidly expanded, raising the prices of median rent and median housing units, and creating a housing shortage for locals.
This wasn’t the first time Velázquez took on Act 22.
From the Losing Puerto Rico website:
Washington Has the Power to Fix This.
The PROMESA federal law passed in 2016 gave Congress the power to override financial lawmaking decisions made by the island’s elected leaders. Congress also has the power to oversee the LUMA contract and take the federal reconstruction dollars away from LUMA and give them back to the local communities that can better spend it.
So, Congress has the ultimate power to decide who gets away with not paying federal taxes in Puerto Rico. And guess what? The US law – which was supposedly intended to help Puerto Ricans, is actually just helping rich outsiders evade taxes. Worse, it’s driving up the cost of living and making a homeland uninhabitable to Puerto Ricans. Congress needs to close this loophole, immediately – or else Puerto Ricans are at risk of losing Puerto Rico.
What can we do, you ask, as readers of a site providing “news you can do something about?”
Sign this petition. Ask your House rep and senator where they stand on this issue, and push them to support it. Follow groups on social media who are using the hashtag #AbolishAct22. Spread the word by sharing the videos from Losing Puerto Rico.
Thank you.
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