Wednesday, January 12, 2011

Is the U.S. About to Secretly Bailout Puerto Rico?

Like the finances of governments around the world, the finances of the government of Puerto Rico are a disaster. They are in the hole for about roughly $6 billion. So what do they do? They tax foreign firms to the tune of $6 billion.

Foreign firms really mean U.S. firms, and a lot of those foreign firms are actually Big Pharma firms.

Big Pharma is in Puerto Rico for tax breaks, not tax hikes, but Big Pharma isn't sweating this one too much.

The Daily Caller reports:
Gov. Luis Fortuño signed the new tax into law Oct. 25. That day, the Washington, D.C.-based whiteshoe law firm Steptoe & Johnson issued him a legal brief arguing U.S. firms should receive money from the U.S. government to offset the Puerto Rico tax increase, which Fortuño sent to the Internal Revenue Service, where a decision is pending.

The international tax law in question is complicated, but experts agree the tax, and the request, are an unusual use of portions of the tax code intended to avoid double taxation on U.S. firms in countries that have reciprocity treaties with the U.S.
Got that? Puerto Rico taxes Big Pharma, Big Pharma for all practical purposes sends the tax bill to the U.S. government. The U.S.,  therefore, bails out Puerto Rico.

Supposedly, Big Pharma is upset about this last minute tax. The IRS hasn't yet ruled yet on whether it will allow the tax credit, which would allow the bailout to begin. But, this ruling isn't going to stop at a technocrat's desk in the IRS. This decision will be made at that big white house.


  1. This and Illinois should be a warning to all that the government class is going to go to great lengths over the next four to five years to preserve its spoils that were gained from the past two bubbles.

    We haven't seen anything yet. There are a lot of state and local government pension millionaires that are counting on their payoff come hell or high water. Here is a sample from Illinois of what some of these pensions look like for top teachers and admins. God only knows what this probably looks like for much higher paid public safety workers.

  2. Taxpayers are the world's greatest fools.