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Slide Notes

The U.S. won the Commonwealth of Puerto Rico in 1898 after the Spanish-American War. It is now an unincorporated territory; its people are citizens of the U.S. who pay social security but not federal income tax, and they cannot vote for president. The vast majority of the island speaks Spanish, but English is still an official language.
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#693: Unpayable

Published on Apr 06, 2016

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PRESENTATION OUTLINE

#693: Unpayable

Mae Lynn Harrington
The U.S. won the Commonwealth of Puerto Rico in 1898 after the Spanish-American War. It is now an unincorporated territory; its people are citizens of the U.S. who pay social security but not federal income tax, and they cannot vote for president. The vast majority of the island speaks Spanish, but English is still an official language.
Photo by orangejack

Section 936

  • enacted 1976
  • granted U.S. corporations a tax exemption on income originating from U.S. territories
  • $4B/year in lost tax revenue
  • phased out 1996—2006

Untitled Slide

Puerto Rican bonds

  • exempt from federal, state, and local taxes
  • became the greatest export Puerto Rico ever had
  • gov't overproduced them and did not actually have the money to back them up
  • $72B public debt (≈ 68% of its GDP)

Discussion Questions

  • Should the gov't have repealed section 936?
  • Why were the bonds so popular?
  • What happened when the demand for the bonds increased?