Treasury’s Puerto Rico proposals left out many important details

“Lawmakers grill officials on severity of Puerto Rico’s debt crisis,” (Feb 25) explains well the significant doubts lawmakers have about the Treasury’s proposals. Treasury officials’ testimony lacked details on the major expenses that have to be adjusted to reflect Puerto Rico’s new economic reality and didn’t identify who will pay for its proposals.

House Natural Resources Committee Chairman Rob Bishop (R-Utah) asked the Treasury’s Antonio Weiss if everything should be put on the table, given the severity of the debt crisis. For example, should Congress give a federal control board the authority to revise all “acquired rights” that have been approved by local courts in Puerto Rico in past decades? Acquired rights include hundreds of millions in Christmas bonuses to all government employees — $120 million — and pensions to retired teachers and judges and their widows. Acquired rights also include pensions to senior executives of government enterprises, like the insolvent Electric Utility, plus police escort and office expenses of former governors.

The Treasury officials didn’t explain if the board should have authority over local procurement contracts and authority to name and remove officials of the 100-plus government-controlled entities in Puerto Rico. Many government-controlled entities there have their own budgets and treasuries, such as the insolvent Electric Utility. These entities have independent bank accounts that are used to pay high salaries and pensions of former board directors. Treasury should recommend giving the board the authority to name and remove senior officials in the government-controlled entities, and the authority to approve and amend their budgets, as the DC board did.

The Treasury also proposed extending the earned income tax credit for Puerto Rico. Yes, the EITC would be an effective tool to promote labor market participation in Puerto Rico, which is the lowest in the nation. But who will pay its estimated $6 billion cost?

A fair budget proposal to extend the EITC to Puerto Rico would ask the wealthy on the island to pay for it. According to the latest tax analysis done by Government Accountability Office auditors, there would be sufficient federal income taxes paid in Puerto Rico to pay for the EITC and solve the fiscal crisis.

Deleting IRC Section 933, which now exempts island residents from federal income taxes, would also end the unfair tax competition Puerto Rico is waging against the 50 states. More than 200 millionaires have come to the island to avoid federal taxes on their financial investments. This tax loophole is a blatant abuse of the IRC Section 933. Congress should demand the wealthy in Puerto Rico  first pay their fair share before asking the taxpayers in the 50 states to help them fix their fiscal and debt crisis.

From Jose Oyola, Arlington, Va.

By Jose Oyola

Treasury’s Puerto Rico proposals left out many important details