Encouraging Tax Evasion & Fiscal Support for Puerto Rico

I just came across this Bloomberg article about John Paulson, who has invested nearly $10B in his own funds and is considering taking advantage of a “year-old Puerto Rican law that lets new residents pay no local or U.S. federal taxes on capital gains, according to Alberto Baco Bague, Secretary of Economic Development and Commerce of Puerto Rico.”

A key difference between living in Puerto Rico and other tax havens is being able to retain US citizenship. Being a US citizen should entail paying US taxes. My gut reaction is to consider policies to discourage this behavior such as reducing the amount of federal support to Puerto Rico by exactly the amount of evaded tax revenue from this new law until they overturn it.

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About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar. http://faculty.chicagobooth.edu/owen.zidar/index.html
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2 Responses to Encouraging Tax Evasion & Fiscal Support for Puerto Rico

  1. Pingback: Taxation and International Mobility of Superstars | owenzidar

  2. I was surprised to find this out, too. There’s some more great information here: http://www.puertoricoreport.org/go-to-puerto-rico-to-avoid-tax-on-stock-profits/.

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