Statehood Would Be a Step Down for Puerto Rico, as explained by Peter Schiff in episode 257

 

From the comments:

I still remember the story told by Peter Schiff about the Samoa Islands. Peter said the standard of living of the typical Samoan declined when Congress required Samoa business pay the Federal minimum wage. The principal industry of Samoa is the fishing industry. After Congress imposed the minimum wage many Samoan workers became jobless. Today, fewer ships visit Samoa, less tourism, the devastated fishing industry have impoverished Samoa. According to Peter, all were the “gifts” of US minimum wage (that were detrimental to Samoa).
Los Puerto Riqueños (aka Boriquas), like their English speaking US counterparts, have no clue what is good or bad for them. It does not surprise me that they would ask to be a state. And thus to be more tied in to Washington. Maybe they hope they would have been bailed out?
I am from Puerto Rico and statehood is not a solution , if PR want to be a state they need to first to pay some of the debt, expand the entrepreneurship, remove some of the laws that don’t make sense and cut the size of the government. This problem was cause by the USA government and the PR government, is simple to solve but in the end ….politics
slidecatch
Peter, there is a problem with what you say in this podcast. I quote from a paper by DLA, a global law firm: It is important to note that income derived from sources without Puerto Rico by a bona fide resident of Puerto Rico will nonetheless be subject to US federal income taxation. This is important and should be taken into account by those individuals who have a portfolio of investments that generate income from sources without Puerto Rico. Even though this income may be exempt from Puerto Rico income taxes under Act 22, it will continue to be subject to US federal income taxation. Special rules apply to gains that may be derived by an individual with respect to the sale of securities held at the time of becoming a bona resident of Puerto Rico. [Source: https://www.dlapiper.com/en/us/insights/publications/2016/08/puerto-ricos-act-20-and-act-22/] So, in other words, you can’t just move to PR and suddenly not have to pay federal income taxes on dividend and interest income from your investment portfolio. And, although you would receive some kind of tax credit against federal capital gains taxes if you sold assets held prior to becoming a PR resident, your tax would not be zero.
Peter Schiff
Yes, but you can sell your stocks just before they pay their dividends, and turn taxable dividends into tax free capital gains. Then buy them back cheaper, and do the same thing for each subsequent dividend. Also there are other ways to use funds to transform global taxable dividends into tax free Puerto Rican sourced income.
caganb
we don’t want another state with 78% welfare people.
Peter you have become involved with politics, perhaps this is the place to run for politics if they allow you. All the reasons you give here, are good reasons to try and get people on your side. Political parties across the entire world have a deficiency of business experience and intelligence. Run as an independent party if possible. And another reason is you have proven yourself in business. You will be an exceptional manager if you ever won.
ContrarianExpatriate
Peter, you neglect to mention the local PR taxes. Just because the federal taxes don’t apply, the local income taxes still often do at rates higher than the federal ones.
Nick13ro
Yes, but those only apply for existing residents- they assume those are slaves tied to the land. Any newcomers are basically tax exempt.
Peter Schiff
True, but that is Puerto Rico’s choice. They can repeal those taxes. However, if federal income taxes were added on top, it would make the situation much worse for people who work.
Joe Billielo
I hate to say this, but I’d have to be crazy to not view this as a conflict of interest on your part Pete, even though I agree with you.
Peter Schiff
Not really. Even if PR becomes a state, the process will take many years. I would guess 10. Plenty of time for me to make lots of tax free money. But a horrible deal for PR (if PR becomes a state)
Joe Billielo
Peter Schiff Yeah, I agree Pete……..It’s terrible to imagine Puerto Rico turning into a total welfare state.
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