Fiscal board proposed its own tax reform, which La Fortaleza did not use

José R. Pérez-Riera, the Financial Oversight and Management Board’s revitalization coordinator (oversightboard.pr.gov)

By EVA LAUREANO

In December 2025, the Financial Oversight and Management Board unveiled its own ambitious tax reform proposal -- one that stood in stark contrast to the tax rate cuts championed by Gov. Jenniffer González Colón.

The details came to light through Kenneth Rivera, a tax partner at Galindez, though the reason La Fortaleza chose not to use the information in its own tax reform draft remains a mystery. Officials did not answer requests for comment. 

José R. Pérez-Riera, the oversight board’s revitalization coordinator laid out four distinct scenarios for overhauling the tax code in emails to government officials. He offered a tantalizing prospect: “We can provide much better takeaways and explanations for any of the scenarios that you want us to focus on, and we would be happy to do so.”

At the heart of the oversight board’s plan is a flat 8% personal income tax -- retirement and unemployment income excluded -- combined with a generous standard deduction of $30,000 for individuals and $60,000 for couples. Advocates say the bold move would eliminate income taxes for 77% of taxpayers, sparking increased workforce participation and simplifying the tax system.

The proposal is equally ambitious for businesses: an 8% corporate tax rate, plus the complete elimination of taxes on capital gains, dividends and interest to attract investment. A broadened sales tax base would see the rate lowered to 10%, now extending to financial services, vehicles, fuel and lodging. Essential items like food and healthcare would drop to a 4% sales tax. Property taxes would shift to market value at a 0.5% rate, with a $25,000 homestead exemption for homeowners, and the unpopular inventory tax would be scrapped altogether.

Scenario 8100 offers a twist: groceries, healthcare and education would be entirely tax-free. Property taxes would be modernized, moving to a 0.625% market-value rate, still with the $25,000 homestead exemption and no more business inventory tax.

Scenario 8197 targets middle-income earners, granting a standard deduction to those making between $20,000 and $40,000. The result? About 54% of taxpayers and two-thirds of retirees would pay no income tax. Real property would be taxed at just 0.5% of market value (with the same homestead exemption), personal property and inventory taxes would be eliminated, and consumption taxes would be streamlined: a 10% sales tax would apply broadly, but basic needs -- unprepared food, health, and education -- would remain exempt. Motor fuels, lodging and financial services would be taxed at a reduced 5%, shifting some of the tax burden to non-residents.

The governor last year proposed to double the deductions for income tax rates but the proposal was rejected by the oversight board. She then introduced legislation to distribute $554 million in direct payments to salaried workers.