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How Puerto Rico Became a Tax Haven for the Super Rich

267 points by evo_9 8y ago

gammateam 8y ago
tl;dr US territories often times have the ability from Congress to create parallel tax systems. Some have made attractive ones. protip: Some other US territories have favorable tax laws too, if you want to dig. Its nice that they aren't being written about by EVERYONE right now. Nobody's going to spoil it for you because that'll be spoiling it for themselves too. ALL US territories have the same catch: they are underdeveloped bad neighborhoods, and changing the laws doesn't get the comfortable New England elites to move from their gated communities. New money MIGHT be interested.
- Timmah 8y ago
  I hope Los Zetas see the opportunity here. They could net a few million from running their playbook on a newly minted crypto-bro thinking he found a "haven" for his money.
  - gammateam 8y ago
    Los Zetas are in the Caribbean territories? I thought they were just in east Mexico and the Yucatan Peninsula I mean they are well funded and connected and can go anywhere but... don't?
hogwild 8y ago
Gee maybe if they taxed these people themselves we wouldn't have to buy them a new electrical grid.
- Vivtek 8y ago
  Gee maybe if you knew anything about Puerto Rico you'd know we're buying our own new electrical grid. Not like Washington is helping us much. I kid you not, America spent more on Halloween candy in 2017 than Puerto Rico has seen disaster relief in the year since Maria. ($9.1 billion versus roughly $6 billion total.) So thanks, 51-day-old Republican troll, but try again.
  - vuln 8y ago
    Your numbers are a little off. 16 Billion in aid. How much has Puerto Rico paid in taxes? I remember when people where losing their minds in the blue states when federal aid was given to a red state. Tesla is rebuilding your infrastructure. Tesla get so many subsidizes it's not funny. Let us not forget how inept your local government is. https://www.reuters.com/article/us-puertorico-storm-aid/puerto-rico-says-to-receive-16-billion-in-federal-disaster-aid-idUSKBN1FU00V https://www.reuters.com/article/us-puertorico-storm-aid/puer... https://electrek.co/2018/06/03/tesla-energy-storage-projects-puerto-rico-elon-musk/ https://electrek.co/2018/06/03/tesla-energy-storage-projects... https://www.snopes.com/news/2018/09/13/left-huge-stockpile-bottled-water-sitting-puerto-rico-landing-strip/ https://www.snopes.com/news/2018/09/13/left-huge-stockpile-b...
    - cagenut 8y ago
      Hi, I downvoted your comment, but as is customary here I'll lay out why: "tesla is rebuilding your infrastructure" <electrek link> this is categorically false. tesla pr has claimed to be doing "11,000 projects" in PR, the majority of which are likely just solar+powerwall installations. even optimistically this will not add up to 10% of PRs electrical generating capacity. that is also assuming real world numbers approach tesla PR numbers, which has not exactly been the pattern (note: i say this as both a shareholder and a huge believer in the grid storage side of the biz). Tesla get so many subsidizes it's not funny. if you think thats funny, I dare you to calculate out the subsidy values of 11,000 powerall projects and compare that to almost anything else. a single mile of interstate highway is more "subsidized". a single right-of-way for the powerlines between a generating station and a city is more subsidized. if you believe in global warming, a single nat-gas generator is wildly more subsidized.
    - cycrutchfield 8y ago
      Puerto Rico does not pay federal income tax because, unlike states, they lack sovereignty. Think of them like a ward of the federal government. Asking how much they have contributed in federal taxes is like asking why your kid is not paying you rent to live in your house.
  - 8y ago
- hcknwscommenter 8y ago
  I'm no expert on these matters, but it's the internet so I have an opinion. These territories face a catch-22: to the extent they raise taxes they become less attractive to the Super Rich (well outside investment in general). You might also end up with a race to the bottom scenario, where taxes go to zero, labor laws go to heck. You actually see all of these issues and more in practice so it is not just theoretical. It is a difficult quandary to escape from. You basically need an engine for real organic growth that doesn't rely on tax gimmicks. Finally, I think Puerto Rico itself also suffers from an artificial handicap with respect to the Jones Act.
  - debacle 8y ago
    The article mentions that parts of the island haven't been reassessed for property taxes in 60 years.
    - Kalium 8y ago
      Who do they think they are, California?
      - tasty_freeze 8y ago
        Do you honestly hold that opinion, or did you think you were on reddit? Cities in California (re)assess property values just like they do everywhere else. Go buy a house there and tell me that your assessed value is about right for a house in 1958.
        jwc1 8y ago
        Have you ever read about Prop 13? Basically it set property tax rates at 1% of a property’s sale price and capped annual increases at no more than 2%. The only time a house sees fair reassessment is when it sells...which means a lot of people end up sitting on land. http://www.latimes.com/opinion/op-ed/la-oe-friedersdorf-prop-13-20180604-story.html http://www.latimes.com/opinion/op-ed/la-oe-friedersdorf-prop... "Perhaps most perversely, Proposition 13 has made it harder, not easier, to become a homeowner. California has one of the lowest rates of homeownership (55%) in the nation, second only to New York and nine percentage points below the national average. The pernicious incentives that led to these outcomes are obvious in hindsight. With property taxes near frozen, local governments began to see residential development as a liability and commercial development as an income stream. For 40 years, that perspective shaped which new projects cities approved. Homeowners, meanwhile, had a disincentive to move if they had a low property tax bill locked in. Finally, these relatively low property taxes made California an attractive place to undertake speculative real estate investments and leave valuable parcels of land undeveloped."
- komali2 8y ago
  By "we" do you mean, er, Americans? Puerto Ricos are Americans. Does it also bother you that you're "buying" power lines in Oklahoma, Transmission terminals in California, Nevada, and Arizona, and windmills in Wyoming? https://www.utilitydive.com/user_media/cache/07/43/07436e35bfaa20747b2defc44d7125e9.jpg https://www.utilitydive.com/user_media/cache/07/43/07436e35b...
  - hogwild 8y ago
    By "we" I mean those of us who pay federal income tax.
    - komali2 8y ago
      Do you believe every American that benefits from US taxes pays federal income tax? Do you believe the benefits an American receives should be tied to the tax money they pay in? Do you believe Joe Blow Puerto Rican gas station attendant, who does pay income tax, cares whether it's federal or Puerto Rico? If you have an issue with tax law, why on Earth would you take it up with anybody other than the people that write the tax laws - the executive and legislative Branches?
- mikeash 8y ago
  “They,” as if their government wasn’t our federal government.
debacle 8y ago
> Government is a business, and its most important customers are the rich. I think that's a bit jaded. A better phrasing might be: "Modern absentee democracies are leveraged by those who can extract the most value from them."
- andrepd 8y ago
  What an ironic comment in itself. Those phrases mean exactly the same thing, yet we are all familiar with the habit of the powerful of spinning atrocities with words. I for one suggest "production assurance security forces" instead of "paramilitary death squads".
  - debacle 8y ago
    > we are all familiar with the habit of the powerful of spinning atrocities with words. Are your words not maybe slightly jaded?
    - pjc50 8y ago
      If you're not jaded in 2018 you're not paying attention.
      - debacle 8y ago
        While I don't disagree with the sentiment, I think we're on the cusp of better things. Maybe that just means I'm ignorant, but I see a lot of potential in the world, and especially in young people.
      - beat 8y ago
        I've actually gotten significantly less jaded in 2018. I attribute that to finally doing something about my participation in the toxic cesspool of internet politics, quitting my steady diet of outrage porn, and looking at the big picture. The absolute best thing we can do for our cynicism is read Factfulness, by Hans Rosling. Once you see the ways our otherwise intelligent, well informed, and good-intentioned minds mislead us, you realize that there's a lot less to be jaded about than you thought. But even before reading Factfulness, I made a lot of progress just by reading a lot more history and philosophy, and a lot less Facebook, Twitter, and Google News. The whole urgent vs important dichotomy that ruins our ability to manage our work also ruins our ability to manage our understanding of the world.
dv_dt 8y ago
For those looking for a different, and maybe deeper perspective on this; this was an interesting podcast. It is maybe the latest example of the shock doctrine / disaster capitalism pattern where disasters often lead to profits for those with access to capital. https://www.blubrry.com/thedig/34718421/naomi-klein-and-mercedes-martnez-the-battle-for-puerto-rico/ https://www.blubrry.com/thedig/34718421/naomi-klein-and-merc...
- 2bitmachine 8y ago
  The Dig is like EconTalk for leftists. Even if you’re not onboard with the ideology, the intelligence, researched depth, and interest of the host Daniel Denvir is matched by little else in media today.
- Nasrudith 8y ago
  The source really undermines itself with the starting sentence - both the crypto-bros and the dystopia assertion without any text elaboration. That sounds kind of obvious from a capital standpoint alone. Disasters cause expensive damages so anyone in a position to repair stands to make money. Anyone who lacks the reserves and needs loans and financing would be needed. I don't think it in itself qualifies as unethical even - while uncomfortable to make money from the misfortune of others the alternatives are worse. Now other associated unethical practices may be involved like price gouging, and probably happened with certainty given both the breadth of history and human greed. It goes without saying that causing the bad situation and then benefiting is an ethical failure even without any bad intent. Deliberately causing it being clear evil.
  - 2bitmachine 8y ago
    >dystopia assertion without any text elaboration I think 3000+ dead US citizens, whose deaths were dismissed as “inflated numbers” by a mendacious reality TV star at the head of a global nuclear empire, kind of speaks for itself on the angle of dystopia >I don't think it in itself qualifies as unethical even - while uncomfortable to make money from the misfortune of others the alternatives are worse. Economics doesn’t occur in a vacuum. Puerto Rico is for all intents and purposes a colonial territory of the United States. How ethical a given action is isn’t simply rooted in the action itself, but the history that preceded it and established the power relations upon which any given transaction are premised. Crypto-currency speculators might not want to see themselves through the lens of colonialism, but that’s because they’re part of those who have benefited from colonial expropriation. You either respect the right of the Puerto Rican people to understand their own circumstances (of which anti-colonialism is a long-running, dominant narrative) or you mythologize away that history because it makes you money and you just don’t care. But the history is real no matter how you dress up your amorality in the narratives of economics.
pjc50 8y ago
This is the kind of thing that people mean by "disaster capitalism". PR is wrecked and desperate for money, so it resorts to tax competition - but only for wealthy foreigners, not its own residents. This drives up local inequality while also taking away from the mainland's tax base. And in the end it doesn't quite manage to solve the problems for the rest of PR.
- hkmurakami 8y ago
  In theory once you attract a big enough cluster of “tax hackers”, the government can then modestly increase taxes on these folks and that can be a high leverage thing once you’ve attracted a large revenue base.
  - Timmah 8y ago
    Ah, so exploitation of the middle class is okay because it's only temporary. Gotcha.
  - Jtsummers 8y ago
    In theory... But many of these people have sufficient mobility that you have to remain under the tax level of your competition. Most of them have no actual tie to Puerto Rico and would leave in a heartbeat if they found a better deal.
    - mikeyouse 8y ago
      Also, it turns out that these super high net worth individuals and entities have a lot of political sway. Once you start talking about raising their costs (taxes), they will put a ton of resources into making sure you are no longer in position to do so.
    - darawk 8y ago
      > But many of these people have sufficient mobility that you have to remain under the tax level of your competition. Not really. Puerto Rico has no real competition. It's the only place you can live inside of the US without paying federal income tax. If Puerto Rico were to raise its local tax, to say, 10%, it would still be the lowest overall tax jurisdiction in the US by a mile.
noetic_techy 8y ago
This was talked about at length on Joe Rogans show by Peter Schiff: https://youtu.be/ycPr5-27vSI https://youtu.be/ycPr5-27vSI I think its a net benefit to Puerto Rico to be in this position.
- s73v3r_ 8y ago
  Not if Puerto Rico isn't able to tax those super-rich using them as a tax haven.
  - caymanjim 8y ago
    If they taxed them, it wouldn't be a tax haven.
  - vlehto 8y ago
    Puerto Rico now has rich consumers who pay the salaries of poor Puerto Ricans. Who then pay income tax. Small slice from a big pie is better than big slice from non-existent pie.
    - s73v3r_ 8y ago
      Trickle down economics was long ago shown to be a complete fraud.
      - vlehto 8y ago
        You're right. Money doesn't flow too easily from the most rich to the most poor without government intervention. But state finance is separate issue from that. And money flowing to the most poor would not do much to state finance, because the most poor typically are unemployed and hardly pay any taxes.
- st1ck 8y ago
  That's the one with Elon Musk. This is Schiff: https://www.youtube.com/watch?v=by1OgqQQANg https://www.youtube.com/watch?v=by1OgqQQANg. And this one too: https://www.youtube.com/watch?v=3u7kDfEtKfs https://www.youtube.com/watch?v=3u7kDfEtKfs
CryptoPunk 8y ago
The problem is that once the rich have settled, populist movements will grow to tax them, and the rich being settled as they are, can't easily escape these politically coordinated expropriations. The result is that the rich begin to slowly trickle out, at a rate that is not fast enough to make the negative repercussions of the involuntary income redistribution that voters support apparent to them.
- metalliqaz 8y ago
  And what are those negative repercussions?
  - r_smart 8y ago
    Presumably the loss of a tax base. I think OP is saying the laws slowly drive people out in a way that doesn't make it apparent the reason people are leaving is those laws. Eventually you wind up with a situation that levies high taxes on the rich but no people to actually tax.
  - CryptoPunk 8y ago
    For the rich individuals: they either get taxed at high rates, resulting in a loss of enjoyment in their rights, or have to suffer the disruption of emigrating to a new country. For the former tax haven: it loses out on capital growth, which means less economic growth.
    - consz 8y ago
      What does a rich person actually lose (ie. materially how is their life different) when they're taxed at a higher rate?
      - sokoloff 8y ago
        I think that Act 22 folks are often the "barely rich" or "incorrectly categorized as rich", where differential tax policy actually has an effect on their lifestyle (and therefore more strongly drives behavior). Take someone with $5MM in investable assets. Using a simplistic 4% rule of thumb, that can generate $200K of income per year. Tax that at 4%, and you have $192K to spend. Tax it at a blended 25% and you have $150K to spend. At that level of income, $3500/month is very much a noticeable difference, IMO. ($16K/mo vs $12.5K/mo spendable.) Now, consider that $150K/yr living in the mainland US goes farther than $150K/yr on Puerto Rico, and someone with $5MM and eligible for Act22 isn't going to move to PR without Act22. Peter Schiff's quote in the article sums it up very well, I think: “Who would come to a bankrupt island to pay high income taxes?”
andreworks 8y ago
Lots of Bitcoin millionaires moved to Puerto Rico to avoid their capital gains taxes. Peter Schiff mentions this on his interview with Joe Rogan.
- deleted 8y ago
  [deleted]
contingencies 8y ago
Read this article then ran in to ... https://www.youtube.com/watch?v=CxKArhySbko https://www.youtube.com/watch?v=CxKArhySbko ... couldn't stop laughing!
rdl 8y ago
Curious who else is in Puerto Rico. I'm moving to either Rincon or San Juan later this year, decided back in January.
peter303 8y ago
Similar story from months ago https://www.nytimes.com/2018/02/02/technology/cryptocurrency-puerto-rico.html https://www.nytimes.com/2018/02/02/technology/cryptocurrency...
cpursley 8y ago
Politics aside, Puerto Rico’s Act 20 is an interesting opportunity for American SaaS businesses. Avoid most federal income tax and employ at least 3 locals in the process. https://www.quora.com/Do-Puerto-Rico-Acts-20-and-22-apply-to-software-including-development-consulting-and-SaaS-sold-to-clients-located-in-the-USA https://www.quora.com/Do-Puerto-Rico-Acts-20-and-22-apply-to... https://prbusinesslink.com/act-20/ https://prbusinesslink.com/act-20/
sergefaguet 8y ago
Governments should be competing for wealthy taxpayers. And as income sources become divorced from physical locations, they will be forced to do so more and more every year. I run venture backed businesses. Teams are distributed. So I count days across the world and do not pay taxes anywhere (i am not a US citizen so it is much easier). In the process my company and I benefit from low cost of capital raised in silicon valley, low cost of excellent talent hired in russia, my personal expanded social network in markets in Asia. And it easily pays for itself just in terms of not needing to pay any taxes anywhere. It just makes sense to live this way once you have high income, are building something that is not physically in one location, understand how to be healthy/social/etc while living in many places. the current tax system has no future. the fundamental reason is that there is simply no point for anyone to pay crazy taxes. the United States (or any other country) just do not deliver enough marginal value from being there for more than X days per year to pay an extra 20-40% in taxes. to help your community – donate to things you care about and add value for other people that way. i want health research to benefit. it makes much more sense to donate/invest there, than to send the fruits of my work to the NSA to fund them to spy on me. i hope more and more people do this.
- Luc 8y ago
  Excellent trolling, well done.
  - sergefaguet 8y ago
    hah. i do believe every word of it.
    - rawTruthHurts 8y ago
      Rather off-topic, but I'm curious abut your view of Bezos charitably funding schools instead of improving his worker's conditions.
      - sergefaguet 8y ago
        very positive. he is building value for society by: - bringing cheaper great products to vast numbers of people - building AWS infrastructure that enables other people to build products cheaper and faster - creating huge number of jobs (that you might not like but lots of people in the world would like to have) - funding things he cares about one of the most useful and beneficial people in the world.
deleted 8y ago
[deleted]

267 points by evo_9 8y ago

tl;dr US territories often times have the ability from Congress to create parallel tax systems. Some have made attractive ones. protip: Some other US territories have favorable tax laws too, if you want to dig. Its nice that they aren't being written about by EVERYONE right now. Nobody's going to spoil it for you because that'll be spoiling it for themselves too. ALL US territories have the same catch: they are underdeveloped bad neighborhoods, and changing the laws doesn't get the comfortable New England elites to move from their gated communities. New money MIGHT be interested.

Timmah 8y ago
I hope Los Zetas see the opportunity here. They could net a few million from running their playbook on a newly minted crypto-bro thinking he found a "haven" for his money.
- gammateam 8y ago
  Los Zetas are in the Caribbean territories? I thought they were just in east Mexico and the Yucatan Peninsula I mean they are well funded and connected and can go anywhere but... don't?

hogwild 8y ago

Gee maybe if they taxed these people themselves we wouldn't have to buy them a new electrical grid.

Vivtek 8y ago
Gee maybe if you knew anything about Puerto Rico you'd know we're buying our own new electrical grid. Not like Washington is helping us much. I kid you not, America spent more on Halloween candy in 2017 than Puerto Rico has seen disaster relief in the year since Maria. ($9.1 billion versus roughly $6 billion total.) So thanks, 51-day-old Republican troll, but try again.
- vuln 8y ago
  Your numbers are a little off. 16 Billion in aid. How much has Puerto Rico paid in taxes? I remember when people where losing their minds in the blue states when federal aid was given to a red state. Tesla is rebuilding your infrastructure. Tesla get so many subsidizes it's not funny. Let us not forget how inept your local government is. https://www.reuters.com/article/us-puertorico-storm-aid/puerto-rico-says-to-receive-16-billion-in-federal-disaster-aid-idUSKBN1FU00V https://www.reuters.com/article/us-puertorico-storm-aid/puer... https://electrek.co/2018/06/03/tesla-energy-storage-projects-puerto-rico-elon-musk/ https://electrek.co/2018/06/03/tesla-energy-storage-projects... https://www.snopes.com/news/2018/09/13/left-huge-stockpile-bottled-water-sitting-puerto-rico-landing-strip/ https://www.snopes.com/news/2018/09/13/left-huge-stockpile-b...
  - cagenut 8y ago
    Hi, I downvoted your comment, but as is customary here I'll lay out why: "tesla is rebuilding your infrastructure" <electrek link> this is categorically false. tesla pr has claimed to be doing "11,000 projects" in PR, the majority of which are likely just solar+powerwall installations. even optimistically this will not add up to 10% of PRs electrical generating capacity. that is also assuming real world numbers approach tesla PR numbers, which has not exactly been the pattern (note: i say this as both a shareholder and a huge believer in the grid storage side of the biz). Tesla get so many subsidizes it's not funny. if you think thats funny, I dare you to calculate out the subsidy values of 11,000 powerall projects and compare that to almost anything else. a single mile of interstate highway is more "subsidized". a single right-of-way for the powerlines between a generating station and a city is more subsidized. if you believe in global warming, a single nat-gas generator is wildly more subsidized.
  - cycrutchfield 8y ago
    Puerto Rico does not pay federal income tax because, unlike states, they lack sovereignty. Think of them like a ward of the federal government. Asking how much they have contributed in federal taxes is like asking why your kid is not paying you rent to live in your house.
- 8y ago
hcknwscommenter 8y ago
I'm no expert on these matters, but it's the internet so I have an opinion. These territories face a catch-22: to the extent they raise taxes they become less attractive to the Super Rich (well outside investment in general). You might also end up with a race to the bottom scenario, where taxes go to zero, labor laws go to heck. You actually see all of these issues and more in practice so it is not just theoretical. It is a difficult quandary to escape from. You basically need an engine for real organic growth that doesn't rely on tax gimmicks. Finally, I think Puerto Rico itself also suffers from an artificial handicap with respect to the Jones Act.
- debacle 8y ago
  The article mentions that parts of the island haven't been reassessed for property taxes in 60 years.
  - Kalium 8y ago
    Who do they think they are, California?
    - tasty_freeze 8y ago
      Do you honestly hold that opinion, or did you think you were on reddit? Cities in California (re)assess property values just like they do everywhere else. Go buy a house there and tell me that your assessed value is about right for a house in 1958.
      - jwc1 8y ago
        Have you ever read about Prop 13? Basically it set property tax rates at 1% of a property’s sale price and capped annual increases at no more than 2%. The only time a house sees fair reassessment is when it sells...which means a lot of people end up sitting on land. http://www.latimes.com/opinion/op-ed/la-oe-friedersdorf-prop-13-20180604-story.html http://www.latimes.com/opinion/op-ed/la-oe-friedersdorf-prop... "Perhaps most perversely, Proposition 13 has made it harder, not easier, to become a homeowner. California has one of the lowest rates of homeownership (55%) in the nation, second only to New York and nine percentage points below the national average. The pernicious incentives that led to these outcomes are obvious in hindsight. With property taxes near frozen, local governments began to see residential development as a liability and commercial development as an income stream. For 40 years, that perspective shaped which new projects cities approved. Homeowners, meanwhile, had a disincentive to move if they had a low property tax bill locked in. Finally, these relatively low property taxes made California an attractive place to undertake speculative real estate investments and leave valuable parcels of land undeveloped."
komali2 8y ago
By "we" do you mean, er, Americans? Puerto Ricos are Americans. Does it also bother you that you're "buying" power lines in Oklahoma, Transmission terminals in California, Nevada, and Arizona, and windmills in Wyoming? https://www.utilitydive.com/user_media/cache/07/43/07436e35bfaa20747b2defc44d7125e9.jpg https://www.utilitydive.com/user_media/cache/07/43/07436e35b...
- hogwild 8y ago
  By "we" I mean those of us who pay federal income tax.
  - komali2 8y ago
    Do you believe every American that benefits from US taxes pays federal income tax? Do you believe the benefits an American receives should be tied to the tax money they pay in? Do you believe Joe Blow Puerto Rican gas station attendant, who does pay income tax, cares whether it's federal or Puerto Rico? If you have an issue with tax law, why on Earth would you take it up with anybody other than the people that write the tax laws - the executive and legislative Branches?
mikeash 8y ago
“They,” as if their government wasn’t our federal government.

debacle 8y ago

> Government is a business, and its most important customers are the rich. I think that's a bit jaded. A better phrasing might be: "Modern absentee democracies are leveraged by those who can extract the most value from them."

andrepd 8y ago
What an ironic comment in itself. Those phrases mean exactly the same thing, yet we are all familiar with the habit of the powerful of spinning atrocities with words. I for one suggest "production assurance security forces" instead of "paramilitary death squads".
- debacle 8y ago
  > we are all familiar with the habit of the powerful of spinning atrocities with words. Are your words not maybe slightly jaded?
  - pjc50 8y ago
    If you're not jaded in 2018 you're not paying attention.
    - debacle 8y ago
      While I don't disagree with the sentiment, I think we're on the cusp of better things. Maybe that just means I'm ignorant, but I see a lot of potential in the world, and especially in young people.
    - beat 8y ago
      I've actually gotten significantly less jaded in 2018. I attribute that to finally doing something about my participation in the toxic cesspool of internet politics, quitting my steady diet of outrage porn, and looking at the big picture. The absolute best thing we can do for our cynicism is read Factfulness, by Hans Rosling. Once you see the ways our otherwise intelligent, well informed, and good-intentioned minds mislead us, you realize that there's a lot less to be jaded about than you thought. But even before reading Factfulness, I made a lot of progress just by reading a lot more history and philosophy, and a lot less Facebook, Twitter, and Google News. The whole urgent vs important dichotomy that ruins our ability to manage our work also ruins our ability to manage our understanding of the world.

dv_dt 8y ago

For those looking for a different, and maybe deeper perspective on this; this was an interesting podcast. It is maybe the latest example of the shock doctrine / disaster capitalism pattern where disasters often lead to profits for those with access to capital. https://www.blubrry.com/thedig/34718421/naomi-klein-and-mercedes-martnez-the-battle-for-puerto-rico/ https://www.blubrry.com/thedig/34718421/naomi-klein-and-merc...

2bitmachine 8y ago
The Dig is like EconTalk for leftists. Even if you’re not onboard with the ideology, the intelligence, researched depth, and interest of the host Daniel Denvir is matched by little else in media today.
Nasrudith 8y ago
The source really undermines itself with the starting sentence - both the crypto-bros and the dystopia assertion without any text elaboration. That sounds kind of obvious from a capital standpoint alone. Disasters cause expensive damages so anyone in a position to repair stands to make money. Anyone who lacks the reserves and needs loans and financing would be needed. I don't think it in itself qualifies as unethical even - while uncomfortable to make money from the misfortune of others the alternatives are worse. Now other associated unethical practices may be involved like price gouging, and probably happened with certainty given both the breadth of history and human greed. It goes without saying that causing the bad situation and then benefiting is an ethical failure even without any bad intent. Deliberately causing it being clear evil.
- 2bitmachine 8y ago
  >dystopia assertion without any text elaboration I think 3000+ dead US citizens, whose deaths were dismissed as “inflated numbers” by a mendacious reality TV star at the head of a global nuclear empire, kind of speaks for itself on the angle of dystopia >I don't think it in itself qualifies as unethical even - while uncomfortable to make money from the misfortune of others the alternatives are worse. Economics doesn’t occur in a vacuum. Puerto Rico is for all intents and purposes a colonial territory of the United States. How ethical a given action is isn’t simply rooted in the action itself, but the history that preceded it and established the power relations upon which any given transaction are premised. Crypto-currency speculators might not want to see themselves through the lens of colonialism, but that’s because they’re part of those who have benefited from colonial expropriation. You either respect the right of the Puerto Rican people to understand their own circumstances (of which anti-colonialism is a long-running, dominant narrative) or you mythologize away that history because it makes you money and you just don’t care. But the history is real no matter how you dress up your amorality in the narratives of economics.

pjc50 8y ago

This is the kind of thing that people mean by "disaster capitalism". PR is wrecked and desperate for money, so it resorts to tax competition - but only for wealthy foreigners, not its own residents. This drives up local inequality while also taking away from the mainland's tax base. And in the end it doesn't quite manage to solve the problems for the rest of PR.

hkmurakami 8y ago
In theory once you attract a big enough cluster of “tax hackers”, the government can then modestly increase taxes on these folks and that can be a high leverage thing once you’ve attracted a large revenue base.
- Timmah 8y ago
  Ah, so exploitation of the middle class is okay because it's only temporary. Gotcha.
- Jtsummers 8y ago
  In theory... But many of these people have sufficient mobility that you have to remain under the tax level of your competition. Most of them have no actual tie to Puerto Rico and would leave in a heartbeat if they found a better deal.
  - mikeyouse 8y ago
    Also, it turns out that these super high net worth individuals and entities have a lot of political sway. Once you start talking about raising their costs (taxes), they will put a ton of resources into making sure you are no longer in position to do so.
  - darawk 8y ago
    > But many of these people have sufficient mobility that you have to remain under the tax level of your competition. Not really. Puerto Rico has no real competition. It's the only place you can live inside of the US without paying federal income tax. If Puerto Rico were to raise its local tax, to say, 10%, it would still be the lowest overall tax jurisdiction in the US by a mile.

noetic_techy 8y ago

This was talked about at length on Joe Rogans show by Peter Schiff: https://youtu.be/ycPr5-27vSI https://youtu.be/ycPr5-27vSI I think its a net benefit to Puerto Rico to be in this position.

s73v3r_ 8y ago
Not if Puerto Rico isn't able to tax those super-rich using them as a tax haven.
- caymanjim 8y ago
  If they taxed them, it wouldn't be a tax haven.
- vlehto 8y ago
  Puerto Rico now has rich consumers who pay the salaries of poor Puerto Ricans. Who then pay income tax. Small slice from a big pie is better than big slice from non-existent pie.
  - s73v3r_ 8y ago
    Trickle down economics was long ago shown to be a complete fraud.
    - vlehto 8y ago
      You're right. Money doesn't flow too easily from the most rich to the most poor without government intervention. But state finance is separate issue from that. And money flowing to the most poor would not do much to state finance, because the most poor typically are unemployed and hardly pay any taxes.
st1ck 8y ago
That's the one with Elon Musk. This is Schiff: https://www.youtube.com/watch?v=by1OgqQQANg https://www.youtube.com/watch?v=by1OgqQQANg. And this one too: https://www.youtube.com/watch?v=3u7kDfEtKfs https://www.youtube.com/watch?v=3u7kDfEtKfs

CryptoPunk 8y ago

The problem is that once the rich have settled, populist movements will grow to tax them, and the rich being settled as they are, can't easily escape these politically coordinated expropriations. The result is that the rich begin to slowly trickle out, at a rate that is not fast enough to make the negative repercussions of the involuntary income redistribution that voters support apparent to them.

metalliqaz 8y ago
And what are those negative repercussions?
- r_smart 8y ago
  Presumably the loss of a tax base. I think OP is saying the laws slowly drive people out in a way that doesn't make it apparent the reason people are leaving is those laws. Eventually you wind up with a situation that levies high taxes on the rich but no people to actually tax.
- CryptoPunk 8y ago
  For the rich individuals: they either get taxed at high rates, resulting in a loss of enjoyment in their rights, or have to suffer the disruption of emigrating to a new country. For the former tax haven: it loses out on capital growth, which means less economic growth.
  - consz 8y ago
    What does a rich person actually lose (ie. materially how is their life different) when they're taxed at a higher rate?
    - sokoloff 8y ago
      I think that Act 22 folks are often the "barely rich" or "incorrectly categorized as rich", where differential tax policy actually has an effect on their lifestyle (and therefore more strongly drives behavior). Take someone with $5MM in investable assets. Using a simplistic 4% rule of thumb, that can generate $200K of income per year. Tax that at 4%, and you have $192K to spend. Tax it at a blended 25% and you have $150K to spend. At that level of income, $3500/month is very much a noticeable difference, IMO. ($16K/mo vs $12.5K/mo spendable.) Now, consider that $150K/yr living in the mainland US goes farther than $150K/yr on Puerto Rico, and someone with $5MM and eligible for Act22 isn't going to move to PR without Act22. Peter Schiff's quote in the article sums it up very well, I think: “Who would come to a bankrupt island to pay high income taxes?”

andreworks 8y ago

Lots of Bitcoin millionaires moved to Puerto Rico to avoid their capital gains taxes. Peter Schiff mentions this on his interview with Joe Rogan.

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contingencies 8y ago

Read this article then ran in to ... https://www.youtube.com/watch?v=CxKArhySbko https://www.youtube.com/watch?v=CxKArhySbko ... couldn't stop laughing!

rdl 8y ago

Curious who else is in Puerto Rico. I'm moving to either Rincon or San Juan later this year, decided back in January.

peter303 8y ago

Similar story from months ago https://www.nytimes.com/2018/02/02/technology/cryptocurrency-puerto-rico.html https://www.nytimes.com/2018/02/02/technology/cryptocurrency...

cpursley 8y ago

Politics aside, Puerto Rico’s Act 20 is an interesting opportunity for American SaaS businesses. Avoid most federal income tax and employ at least 3 locals in the process. https://www.quora.com/Do-Puerto-Rico-Acts-20-and-22-apply-to-software-including-development-consulting-and-SaaS-sold-to-clients-located-in-the-USA https://www.quora.com/Do-Puerto-Rico-Acts-20-and-22-apply-to... https://prbusinesslink.com/act-20/ https://prbusinesslink.com/act-20/

sergefaguet 8y ago

Governments should be competing for wealthy taxpayers. And as income sources become divorced from physical locations, they will be forced to do so more and more every year. I run venture backed businesses. Teams are distributed. So I count days across the world and do not pay taxes anywhere (i am not a US citizen so it is much easier). In the process my company and I benefit from low cost of capital raised in silicon valley, low cost of excellent talent hired in russia, my personal expanded social network in markets in Asia. And it easily pays for itself just in terms of not needing to pay any taxes anywhere. It just makes sense to live this way once you have high income, are building something that is not physically in one location, understand how to be healthy/social/etc while living in many places. the current tax system has no future. the fundamental reason is that there is simply no point for anyone to pay crazy taxes. the United States (or any other country) just do not deliver enough marginal value from being there for more than X days per year to pay an extra 20-40% in taxes. to help your community – donate to things you care about and add value for other people that way. i want health research to benefit. it makes much more sense to donate/invest there, than to send the fruits of my work to the NSA to fund them to spy on me. i hope more and more people do this.

Luc 8y ago
Excellent trolling, well done.
- sergefaguet 8y ago
  hah. i do believe every word of it.
  - rawTruthHurts 8y ago
    Rather off-topic, but I'm curious abut your view of Bezos charitably funding schools instead of improving his worker's conditions.
    - sergefaguet 8y ago
      very positive. he is building value for society by: - bringing cheaper great products to vast numbers of people - building AWS infrastructure that enables other people to build products cheaper and faster - creating huge number of jobs (that you might not like but lots of people in the world would like to have) - funding things he cares about one of the most useful and beneficial people in the world.

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