Puerto Rico Is Not America’s Tax Escape Hatch

Editor’s Note: In response to a column by Susanne Ramírez de Arellano about Peter Schiff’s claim that he was “100 percent Puerto Rican” (sidenote: he is not), we noticed that a profile who used the name ‘Peter Schiff’ logged into the comments section of this website with a valid non-spammy email and added several lengthy comments about Susanne’s piece. Over the weekend, The Latino Newsletter contributor Javier Ortiz saw the comments and submitted this opinion piece to me. This entire debate about who is Puerto Rico has always fascinated me, and so I decided to publish Javier’s piece and also add the screen grabs from the comments section. Here’s to more debate and dialogue. — JRV

Maybe the commenter was the real Peter Schiff. Maybe not.

That uncertainty does not change the argument. In a recent comment thread at The Latino Newsletter, someone identifying himself as Peter Schiff argued that Puerto Rico does not need congressional representation if federal income taxes are never “confiscated” in the first place. He said Puerto Rico should keep its unique status, embrace capitalism, slash government, and use its tax treatment to become richer than any U.S. state. He also insisted that critics should stop calling him a freeloader because he pays more taxes than most Puerto Ricans, employs Puerto Ricans, and is helping the island. 

If that was the real Peter Schiff, the argument should be rejected plainly and without apology. If it were not, the argument should still be rejected plainly and without apology.

Absconding from American tax obligations merely by changing one’s place of residence is not an American principle. It is an American loophole.

The worldview expressed in those comments treats Puerto Rico not as a future state, not as a fully equal part of the Union, and not even as a community with the same civic obligations that bind the rest of the country. It treats Puerto Rico as a permanent tax-arbitrage zone for wealthy Americans who prefer the protection of the flag without the burdens that normally come with it. That is not a vision of equality. It is a vision of exemption.

An exemption is the opposite of annexation.

Real annexation means equal rights and equal duties. It means Puerto Rico should not be forced to remain forever in territorial limbo, but it also means Puerto Rico should not sell exception as its core business model. A people who want full membership in the American constitutional order cannot build their future on the proposition that some Americans should be able to opt out of national tax obligations simply by relocating to the island.

That is not capitalism. That is residency-based tax avoidance dressed up as freedom.

Defenders of this position will say that Puerto Rico’s current tax treatment is lawful, that Congress created it, and that the island should use every competitive advantage available to it. Fine. But legality is not the same as legitimacy, and advantage is not the same as nationhood.

The deeper question is what kind of place Puerto Rico should become.

Should it become a fully American jurisdiction that seeks equality through one constitutional order, one civic standard, and one shared obligation to support the nation? Or should it become a boutique haven where wealthy Americans shelter income, lecture Puerto Ricans about prosperity, and then claim that representation is unnecessary because keeping more of their own money matters more than political equality?

The comment thread gave a revealing answer. The person writing under Peter Schiff’s name said Puerto Rico does not need representation if it can avoid federal income taxes. That is not a statehood argument. It is not even a serious argument for self-government. It is the logic of a protected enclave.

It also reveals the moral weakness at the center of the worldview of Acts 20 and 60. Its beneficiaries want the American passport, the American military, the American dollar, access to the American market, and the stability of the American legal order. What they do not want is the reciprocal duty that ordinary Americans carry. They want the benefits of belonging without the obligations that come with it.

That is un-American.

American citizenship is not supposed to be a menu from which affluent people select only the items they like. It is supposed to be a common bond, sustained by shared sacrifice and shared liberty. Americans argue all the time about how much tax is too much tax. That is normal. What is not normal is the idea that national obligation should evaporate because someone moved to a favorable jurisdiction while remaining under the same flag and within the same national family.

To be clear, Puerto Rico needs less bureaucracy, more enterprise, and greater economic dynamism. Even critics in that same thread acknowledged the island’s corruption and inefficiency problems. The Latino Newsletter editor, in responding to the online comments, did not really deny the dysfunction. He made clear that the true backlash centered on the identity claim and what it represented. 

But that is exactly why the tax argument is so dangerous. It takes a real problem and attaches it to the wrong cure.

Puerto Rico’s problem is not that too many Americans are forced to pay federal taxes. Its problem is that territorial status has encouraged too many exceptions. Exception in governance. Exception in accountability. Exception in economic policy. Exception in citizenship. Exception in political rights. The answer is not to monetize exceptions. The answer is to end it.

Puerto Rico should not define its future by how attractive it becomes to tax migrants seeking federal escape valves. It should define its future by whether it is prepared to join the Union on unmistakably American terms. That means equal representation, yes. But it also means equal burden. It means annexation cannot be sold as a means of protecting a tax shelter. It must be sold as the end of the shelter.

Puerto Rico should be fighting for full incorporation into the American system, not advertising itself as the place where that system can be partially evaded.

Whether those comments came from the real Peter Schiff or from someone speaking in his name, the mindset is the same. Puerto Rico is not America’s tax escape hatch. It is either part of the American constitutional family or it is not. And if it is, then wealthy citizens should not be able to treat residence on the island as a device for slipping free of obligations that bind the rest of the nation.

One flag. One Constitution. One civic standard. One tax burden.

That is the American answer.

That is the annexation answer.

Calling the real Peter Schiff.

Javier Ortiz, with over 30 years of experience in technology, business, and the public sector, leads investment technical due diligence and innovation at Falcon Cyber Investments.

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Julio Ricardo Varela edited and published this edition of The Latino Newsletter.

The Latino Newsletter welcomes opinion pieces in English and/or Spanish from community voices. Submission guidelines are here. The views expressed by outside opinion contributors do not necessarily reflect the editorial views of this outlet or its employees.