Puerto Rico will begin an 11.5% islands-wide sales tax July 1, 2015. This will make it the highest sales tax in the U.S. (see this chart for what other states/area charge) and doesn’t even include the municipal sales taxes that are charged additionally.
I have recently been reading a blog/site called War Against All Puerto Ricans about the influence of American politics on the island and it spells out a not-so-pretty picture of colonization throughout Puerto Rico’s history up to the current economic issues facing modern Puerto Rico. Of course, the New York Times has a slightly different version and perspective on what should be done for the debt issues here. I have been trying to unravel what exactly is happening and what would be the best way to help, but I still don’t exactly understand what is going on nor how to fix it. For the most part, I try to steer away from politics and news (especially bad news).
None-the-less, we are people who live here and so therefore have a lot of “word on the street” conversations. And while most things take forever to happen, this sales tax increase from 7% to 11.5% happened very rapidly and took some people off guard. Most people we’ve talked to aren’t optimistic that it will solve anything and many think the entire government is corrupt and should be thrown out. The economic woes of Puerto Rico have been going on for a long time. Back when we first visited the island in 2005 there was no sales tax at all and shortly after our visit they instituted it for the first time ever. It was supposed to solve the then-economic crisis. Apparently it did not.
I am still trying to figure out why there would be tax benefits like Act 20 and 22 that give investors 0% capital gains tax that overwhelmingly benefit the wealthy and then institute such a hugely regressive sales tax (adversely affecting the poor) as this one without at least amending those Acts. I know they are also trying to set up a value-added tax so that items are taxed at all stages of production, but it just seems like kicking around in quick sand.
This latest huge sales tax increase did have the effect on many people, including us, of going out and buying a bunch of stuff prior to the bump in price. It was like Christmas in June! The stores were packed even on a Monday in the middle of the day. At Home Depot where we tried as best we could to buy the things we would need for the cabin, the whole back of the store was filled with orders waiting to be picked up or delivered!
In general for us, we are looking at this tax increase as an opportunity to further hone our skills at limiting consumption and waste. An economy that is built on debt, exploitation of people and resources and mass consumption is sick and hurting anyway! So this gives us further reason to keep growing our own food, making our own things, trading and buying locally and using the informal economy instead of the box stores and corporations as much as possible this day and age.
And I don’t think we are the only ones. Puerto Rico already has a hard time just collecting the 7% tax as many vendors sell only in cash and don’t report or turn in any of the taxes. I can only imagine that collecting an unpopular tax like this one will prove to be even more of a futile endeavor to improving the economy.
Who knows what’s to come with the economy of Puerto Rico, but we are in it for the long haul. For better or worse, we love this island and we want it to succeed and prosper. Just maybe we need to redefine those terms to focus on the success of people and the planet rather than just the money. But hey, if all hell really breaks loose at least there’s plenty of abundance on the island if you just know where to look.