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Puerto Rico Gov. Pitches Sales Tax Cut
Real estate news By YAISHA VARGAS
02.07.08, 10:45 AM ET
Puerto Rico Gov. Anibal Acevedo Vila proposed slashing an unpopular 7 percent sales tax to stimulate the U.S. territory's economy, as it struggles through a second year of recession. In his state of the territory address on Wednesday, Acevedo said the Caribbean island's first sales tax - adopted in November 2006 to close chronic gaping budget shortfalls that forced a partial government shutdown - must be lowered to 2.5 percent. "There is no doubt that the sales tax has done damage to your pockets and to the economy," Acevedo said in his roughly two-hour speech, televised islandwide from the capital of San Juan. "This new tax has reduced consumer confidence, affecting commerce and the service sector."
Acevedo said the government would re-establish an import tax of 6.6 percent to offset the loss of revenue. A Harvard-educated attorney and career politician, Acevedo urged lawmakers in Puerto Rico's bicameral legislature to approve his plan by July 1.
Financial analysts had urged Puerto Rico to impose a sales tax to combat decades of debt that came to a head in May 2006, when the government was forced to shutter schools and furlough 100,000 public workers for two weeks. The shutdown was resolved with an emergency loan and an agreement to impose the sales tax. Acevedo, who was elected governor in 2004 after serving in Washington as the island's nonvoting delegate to Congress, also announced that the island's 42,000 public school teachers in the public education system will receive a $150 monthly raise beginning after this semester.
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