A new government report has revealed that a special tax break in Puerto Rico, designed to attract wealthy investors, may be costing U.S. taxpayers hundreds of millions of dollars every year. The findings show that the program may not be helping the people of Puerto Rico as intended.
Wealthy Americans Benefit, Puerto Rico Sees Little
The Government Accountability Office (GAO) recently investigated Puerto Rico’s Act 60 of 2019, a law that offers large tax breaks to attract millionaires and billionaires. The goal of the law was to boost Puerto Rico’s economy and create jobs for local residents.
However, the GAO report found that many wealthy Americans are taking advantage of these tax breaks without actually living on the island. Some individuals claimed the benefits even though they did not meet the basic requirement of living in Puerto Rico for at least half of the year. This means that the law is being used more as a personal tax shelter rather than a tool for economic development.
Several U.S. lawmakers, including Representatives Alexandria Ocasio-Cortez, Jared Huffman, Nydia Velázquez, and Ritchie Torres, released statements following the report. They said that the findings confirm what they had long suspected: the tax breaks are primarily benefiting wealthy newcomers while delivering little help to Puerto Rico’s local population.
The report also highlights that many of these wealthy individuals might have moved to Puerto Rico even without the tax breaks. This raises questions about whether taxpayers’ money is being spent effectively or wasted on unnecessary incentives.
Federal Tax Revenue Loss and IRS Challenges
One of the major issues identified in the GAO report is the loss of federal tax revenue. The special tax breaks allow these wealthy individuals to avoid paying hundreds of millions of dollars in federal taxes each year. This money would normally go toward Social Security, Medicare, and other important programs that benefit all Americans.
The GAO report points to a significant problem within the Internal Revenue Service (IRS) that makes it easier for wealthy people to claim these benefits without proper checks. During the last few years, the IRS lost about 38% of its enforcement staff. With fewer agents available, it has become harder to verify whether people truly qualify for the tax breaks.
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As a result, some individuals were able to claim Act 60 benefits while failing to meet the residency rules. This lack of oversight has allowed tax evasion to happen on a large scale, leaving federal taxpayers to cover the gap.
Little Evidence of Local Economic Benefit
While the tax break is extremely generous for wealthy newcomers, the report found little evidence that it is helping Puerto Rico’s working families. Residents on the island continue to face challenges like rising housing costs, displacement, and underfunded public services.
Representatives Ocasio-Cortez, Huffman, Velázquez, and Torres emphasized that the program is not delivering on its promises. Instead of strengthening the local economy, the report suggests that Act 60 has mostly benefited outsiders who use Puerto Rico as a tax haven. The law does not appear to deliver meaningful economic benefits to the island’s population, leaving the impact of the program in serious doubt.
The GAO emphasizes that stronger oversight is needed to prevent abuse of the program. Proper enforcement would ensure that only those who meet all the eligibility requirements receive tax breaks. Without these measures, Puerto Rico risks having a system where the ultra-wealthy profit while the local population sees little improvement in economic conditions.
