Aug 17 2006
Puerto Rico and the U.S. Economic Relationship Biblio
Congressional hearing: TITLE: Relief of Porto Rican Taxpayers, BILL-NO: 70 S. 754, SUDOC: Y4.T27/2:P83/3
TITLE: Puerto Rico and the Section 936 Tax Incentives
CIS-NO: 83-H241-21
SOURCE: Committee on Banking, Finance, and Urban Affairs. House
DOC-TYPE: Hearing
DATE: Dec. 15, 1982
LENGTH: iii+365 p. il.
CONG-SESS: 97-2
ITEM-NO: 1013-A; 1013-B
SUDOC: Y4.B22/1:97-97
LC-CARD-NO: 83-601692
MC-ENTRY-NO: 83-12441
Book: Economy of Puerto Rico
Section 936 Google search
A good summary on the net: Section 936
Established in 1976, Section 936 provided U.S. firms operating in Puerto Rico with tax-free income. Section 936 succeeded previous tax breaks for U.S. firms in Puerto Rico dating back to 1921. Section 936 helped to stimulate industrialization and infrastructure development on the island.
On August 20, 1996 the U.S. Congress repealed Section 936 of the U.S. Internal Revenue Code, with a clause that retains its benefit for ten years of existing corporations. Section 30A was created to substitute Section 936. It essentially retains the wage credit component of Section 936.
GAO Report online
GAO/GGD-93-109, 149536
The section 936 tax credit provides significant benefits to U.S. subsidiaries
that locate in Puerto Rico-$2.6 billion in 1989, the most recent year for
which data on tax benefits, compensation, and employment levels were
available. In 1989, section 936 manufacturing corporations’ benefits
slightly exceeded the average compensation these section 936 firms paid
to their employees. Average tax benefits per employee were $24,300 while
average wages paid, including estimated fringe benefits, were $22,800. For
some industries, in particular the chemical industry and its pharmaceutical
component, average tax benefits considerably exceeded wages paid. The
average tax benefits per chemical industry &ployee were $69,800 in 1989,
and average compensation was $32,900.
Economy structural change
Meanwhile, says David Lewis, senior associate at Manchester Trade in Washington, “the push has been away from mass labor manufacturing and more into high-tech services manufacturing:’
From wikipedia
Under the 1952 constitution, Puerto Rico is a Commonwealth (use some benefits of the U.S.) and is permitted a degree of autonomy similar to that of a state of the Union, such an arrangement is known as federacy. Puerto Rico does not have voting representation in the U.S. Congress; neither does it have any electors in the U.S. Electoral College, and therefore Puerto Rican citizens do not participate in the U.S. Presidential elections, although political parties can, and do, have state-like voting delegations to the nominating conventions of both major national parties. A non-voting Resident Commissioner is elected by the residents of Puerto Rico to the U.S. Congress acting as a delegate of the people of Puerto Rico.
Residents of the island do not pay federal income tax, but all commerce is controlled and highly taxed by the U.S. before importation or exportation. Puerto Ricans also pay federal payroll taxes to the U.S., which have a particularly heavy impact on Puerto Rico’s relatively low-income workers. Island residents pay social security taxes and federal taxes other than income but they have limited or no access to several key federal programs. Puerto Rico is excluded from Supplemental Security Income (SSI). For Medicaid, Puerto Rico receives less than 15% of the funding it would be alloted as a state. For Medicare, Puerto Rico pays fully but only receives partial benefits. As statutory U.S. citizens, Puerto Ricans are subject to military service and most federal laws.