News: Puerto Rico a warning sign

The Situation:

Puerto Rico has declared a form of bankruptcy, once again, which is shocking because a panel was in place to solve the bankruptcy issue. Yet, there has been no article through the year of the policies and procedures, which they have taken to actually solve the issues, and what challenges they faced.

The Issue:

The Puerto Rican industry is poorly operated and managed, for instance, one can see that in 2017 Puerto Rico Electric Power Authority Fiscal that there were several issues that the businesses faced.

The reports have stated eleven historical challenges:

  1. Unreliable electrical equipment.

  2. Inadequacies in energy and high reliance on a single source of energy

  3. Little concerns for environmental regulations

  4. High amount of robberies and non-technical losses

  5. Shifting and demanding changes in PREPA (Puerto Rico Electric Power Authority) business model

  6. Legal demands to lower costs for some customers

  7. Little protocols to oblige by

  8. Expired systems and information technology

  9. Poor customer service

  10. Exuberant labour requirements and lack of adequate funding for pension

  11. Unceasing recession condition, which has lowered consumption

Now, combining this with an article, “Hate Taxes? Move To Tax-Free Puerto Rico, Stay America, Avoid IRS” , by Robert W. Wood, which states:

“The incentives include an income tax in Puerto Rico of only 4%. Compare that to your combined federal and state income tax burden you may pay now! Legally avoid the 39.6% federal rate and the 13.3% California (or other state) rate? That sounds pretty good.”

Therefore, it seems to be mix between underfunding, crime, borrowing, and poor tax policy that has riddled the country with a chronic problem of debt.

The Solution:

There are no easy solutions to Puerto Rico’s debt issue. The panel has a draconian problem on their hands. Yet, one thing that may help is to destroy the notions of the Laffer Curve (tax cuts will boost tax revenue). Yet, Puerto Rico is a reason why this notion does not work because in practice, the notions do not pan out. It create an issue of underfunding that fuels debt, which eventually accumulates to a sizable amount that needs intervention, as it happened in Puerto Rico. This eventually leads to unemployment and crime, the article, “Unemployment and crime: New evidence for an old question,” by Kerry L. Papp and Rainer Winkelmann clearly demonstrated the correlation between the two. Thus, we need to push our representative to stop citing inaccurate sources. In addition, we need to vote for people who are willing to listen to reason and history. You, as a voter base, have the power to help Puerto Rico from falling apart through the ballot box.


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