In February, the YouTube influencer Logan Paul announced to his 20 million podcast followers that he was leaving Puerto Rico to move to Los Angeles. Floyd Mayweather, who is preparing for a high-profile boxing match with Paul later this year, said the move would be an opportunity to get locked in and focused on training. He admitted that the main reason for relocating was because of the tax breaks on Caribbean islands.
It's getting crazy here in California, paying taxes, said Paul. In Puerto Rico you 're motivated to make more money and do more because of the consequences that come with it.
Paul, who did not respond to requests for comment on this story, is part of a growing number of wealthy outsiders moving to Puerto Rico to take advantage of the island's laws that offer dramatically low taxes. Since 2012, large investors, crypto currency tycoons and now big-name influencers have moved to the island to bask in the Caribbean sun and unsurpassed tax exemptions. The incentives, which apply mostly to non-Puerto Ricans, have brought much-needed revenue to the island's battered economy but have also intensified inequity on the island, pushed people out of their own neighborhoods and make Puerto Ricans, including those who have left and want to go back, feel like outsiders in their own home.
If anybody needs to be moving and buying in Florida, it needs to be the Puerto Rican people who had no other choice but to leave, says Mara Torres-L pez, 38, who moved to Puerto Rico over twenty years ago to seek better economic opportunity for her family. Since then she has started Di spora en Resistencia, a nonprofit that encourages Puerto Ricans overseas to get politically engaged. I wanted more and my country was not able to give it to me. For Torres-L pez and others fed up with the influx of rich mainlanders, the announcement of the internet celebrity was a fresh call to action.
The grassroots activist collective AbolishAct 60, whose name refers to the tax breaks laws, has started to ask for gringos to go home and for the governor Pedro Perluisi to end the incentives. Pedro Pierluisi is trying to make our patria into Singapore, the collective, whose members are anonymous, wrote in March on Instagram. The government says Puerto Rico needs money; the island has an unemployment rate of 9% and has been in a recession since the tax incentives began.
In 2016, after the government declared its$ 72 billion debt unpayable, Congress passed a tough law known as PROMESA to address the debt crisis, which has resulted in austerity measures and tough cuts on public services. Against this backdrop, the$ 210 million that companies have injected in the economy between 2015 and 2019 under the tax breaks laws are welcome. They have also created over 15,000 direct jobs, which nearly double the average household income according to a study commissioned by the Department of Economic Development and Commerce. Over two-thirds of tax break recipients bought property during the same time and invested collectively$ 1.3 billion in real estate. For the expanding number of critics, the trade-off is n't worth it. Residents and Puerto Ricans in the diaspora alike say that it encourages native colonization and are upset that most modern Puerto Ricans are n't eligible for the exemptions.
They worry that the beneficiaries of the law, who have the right to vote in Puerto Rico, may hold increasing sway over future local elections, including important referendums on whether or not Puerto Rico should become a U.S. state. It is in these past years of tax havens and vocal incentives for local natives that have strengthened and upheld colonialism, says Alexandra-Marie Figueroa of Taller Salud, a Puerto Rican feminist group and a critic of Act 60. She says that the tax laws were crafted behind closed doors to make Puerto Rico a paradise for those who can afford it, but a life sentence for those of us who try to hold on to what we have left of our country.
The growing rift between the wealthy outsiders and their critics has roots in the island's status as an unincorporated territory of the US. All residents of Puerto Rico are exempt from federal taxes, and the Commonwealth government is in charge of making its own local tax laws.
In 2012, the territory passed two legislation, now collectively known as Act 60, designed to create a new revenue stream for the country. Under the Act 20, export companies that start an office on the island can receive a full corporate tax rate and 4% dividend exemptions. If their annual revenue is more than$ 3 million, they are forced to hire at least one Puerto Rican employee. The second law, Act 22, offers full exemption from all passive taxes on local income for individuals.
Its beneficiaries are not allowed to have lived for the last ten years in Puerto Rico and need to spend a certain number of days on the island to maintain their status. They also need to donate their home and at least$ 10,000 a year to a local non-profit. Between 2012 and 2019, DDEC estimates that between the United States and Puerto Rico, 4500 individuals and businesses have relocated their homes or businesses under the Acts. The 2020 numbers are n't yet available, but the DDEC projected that tax breaks would continue to grow in popularity through 2029. For the last decade, the government has maintained that Act 60 is critical to help Puerto Rico's struggling economy.
As economic opportunities have dwindled, millions of Puerto Ricans like Torres-L pez have been forced to leave to the mainland. The current government is in favor of promoting statehood in Washington, where it would have to be approved to ensure local investment in the federal economy. As a territory, the only tool you have is that we have our own tax system, Pierluisi said in 2015 in a 2015 interview. But he was also skeptical about how well the tax laws worked. We need to change the model, he added; since taking over the position as governor last November, Pierluisi has kept the controversial laws in place. I have always been that statehood for Puerto Rico is the best option, Pierluisi tells TIME.
Until then, Act 60 remains part of the new effort to attract population and to attract new investment. He's been criticised widely on social media for gaining from the law; his daughter-in-law, a real estate agent, is currently listed as an admin to the Act 20 22 PR Real Estate Guide Facebook group which shares the latest real estate news and trends for its tax exempt members. Pierluisi denies that he and his family have benefited from tax breaks. Beneficiaries of the law say that the money they have brought has helped the island. I want to make sure that it's clear to the average Puerto Rican-to the degree that we can-that we 're here not only to be recipients, but to be contributors, '' says Robb Rill, the founder of a private equity firm who moved to the island in early 2013 as one of the first grantees of the Laws.
He has since started the 20 22 Act Society, a private group for those who have moved to the island under the incentive program. Rill says oceanfront areas like Dorado Beach and Condado that used to be in complete disarray and in some cases booming with no significant economic activity are now crowded with new construction and restaurants thanks to the tax program. All the income that is brought to the island and all the investment that comes from these two acts to the island is actually incremental revenue that otherwise would not be there, says Rill.
There is no negative for Puerto Rico; there's only positive. ``
It's just a matter of who takes over from here. Abolish Act 60 advocates describe all these changes as predatory gentrification. Puerto Rico's real estate market has been gaining momentum since Hurricane Maria devastated the island in 2017 and displaced thousands of people from their homes.
According to Census bureau data, more than 142,000 locals fled the island in the first year after the storm.
As real estate prices increased, investors moved in, and have then returned in certain areas. The result is that many Puerto Ricans can no longer afford to live in their own neighborhoods, including those who would like to come back home, say activists. The tax break laws are exacerbating the problem as people buy to the island and move property. Popular areas off the East Coast of the mainland like Vieques are facing a tsunami of gentrification as non-Puerto Ricans flock to the archipelago, Myrna Veda Pagan G mez, a long-time Vieques resident, said at a 2018 United Nations Special Committee on Decolonization Meeting.
Right now Puerto Rico looks like the apocalypse hit it because of the government's neglect, says an AbolishAct 60 activist who requested to remain anonymous because of the group's policy. It's a matter of who takes over from here: Puerto Ricans or tax-incentivized foreign entities? There's no excuse for them to create 'opportunities' by becoming owners of land our ancestors have inhabited for over 400 centuries.
Activists have been mobilizing on social media to get their message out, creating online petitions and calling on the government to act. And it seems to be working in some cases: last month, the local journalist Camuy noticed a For Sale sign pop up on a beach plot behind her childhood home in Bianca Graulau. She knew the land was protected for its agricultural potential under a 2015 government plan.
When the real estate realtor told her the property had a$ 1.1 million offer from a luxury real estate developer that was potentially linked to an Act 60 beneficiary, she said she felt her heart sinking. Graulau remembers: It is a place where you grew up, where your family lives and where you spend your life. Graulau decided eventually to post a TikTok video detailing the situation. Less than 72 hours later, it went viral: Hundreds of thousands of people watched the video, shared it and donated over$ 17,000 to a community land trust that works to protect land for sustainable agriculture. In just over a month, activists responding to Pierluisi and the Puerto Rico Planning Board gathered over 9,500 signatures in an online petition calling for Graulau, the agency that created the land use plan, to prevent development that would be harmful to the environment and local communities. Facing increasing public pressure, Pierluisi eventually responded by recognizing up to 7,420 acres of land as nature and agricultural reserves under the 2015 plan, including the 40 acre plot in Camuy.
It may be harder for the developer to purchase the plot, Graulau says, but it's not a guarantee that the swath of land that has been granted to her neighborhood coast for generations wo n't end up being built into condos for newcomers. Pedro Manuel Cardona Roig, a former Vice President of the Planning Board, has been tracking this problem on his El Urbanista' Instagram account to raise awareness about land planning issues on the island. Cardona Roig is concerned that Act 60 recipients will start buying land that is supposed to be protected under the plan, like Camuy. I do n't think there is a problem with property being sold, Cardona Roig says.
The problem I have is what is authorized to be developed in this beachfront property and whether it complies with the vision we as a community have developed. Members of the diaspora are trying to get lawmakers in Washington to pay attention to how Act 60 has brought gentrification on the island and to push the government back home.
There they 've also had some success. We ought to tell this governor, none of this bull-t where you let millionaires and billionaires escape taxes, said Senate Majority Leader Chuck Schumer in a February call with a Manhattan Community Board. He said he would not back the governor's efforts to advance a new legislation seeking Puerto Rico statehood until we straighten it out. Pierluisi could put him and his ambitions for statehood in a tight spot.
Without the backing of Republicans, who historically have been more supportive of these efforts in the House of Representatives than Democrats, the plan wo n't go far. I know that Senator Pierluisi supports equal opportunity for the American citizens of Puerto Rico, said Schumer in response to the comments. As a Senator, he can help change the way that the federal government treats the U.S. citizens living in Puerto Rico by making it a state. But he adds that local tax treatment of residents and businesses will remain in the hands of state governments, like New York and potentially Puerto Rico.
Tores-L pez, founder of Di spora en Resistencia, says that she's not okay with Act 60 recipients continuing to displace her community and making it harder for her and the millions of others in the diaspora to return to their homeland. But being able to return is not enough, she says, what we want to do is the country, she says, referring to the term as the means of reclaiming ancestral remains.
For the Puerto Rican people that are able to go back to not have to go back as martyrs, but to be able to go back and reattach to what they left behind or perhaps in many cases to what their parents or grandparents left behind That's the Puerto Rico we want for all of us.