Governor proposes tax relief checks amid tax reform rejection

Gov. Jenniffer González Colón and Treasury Secretary Ángel Pantojas Rodríguez

By THE STAR STAFF

Gov. Jenniffer González Colón has introduced legislation to distribute $554 million in direct payments to salaried workers, following the Financial Oversight and Management Board’s rejection of her proposal to permanently reduce personal income tax rates.

Treasury Secretary Ángel Pantojas Rodríguez certified that the government has $823 million available in the current budget to fund the checks. The payments would go to taxpayers earning less than $100,000 a year and those with children under the age of 18, mirroring a 2024 initiative led by former Gov. Pedro Pierluisi Urrutia after the oversight board blocked his tax reform proposal.

González Colón criticized the board’s decision, saying it denies residents long‑promised economic relief.

“The Board said no to economic relief for the people of Puerto Rico,” she wrote on social media, adding that the fiscal oversight entity “cannot ignore the will of a people who deserve a lower tax burden.”

The governor said her administration began implementing the first steps of a broader tax reform plan during her first days in office.

Her administration also argued that the proposed tax reform would be fiscally neutral, citing spending reductions, increased revenues and the elimination of certain tax exemptions. Officials said they were surprised by the fiscal board’s communication, claiming the body did not share its concerns or the data used to reach its conclusions. The administration intends to continue engaging with the board in pursuit of tax relief for working families, officials said.

In its statement rejecting the governor’s tax proposal to cut tax rates last week, the oversight board acknowledged the weight of Puerto Rico’s current tax structure and reiterated its support for long‑term, comprehensive tax reform. Legislative leaders had requested the board’s review of González Colón’s proposal, submitted on Jan. 12 as Senate Bill 912 and House Bill 1014.

The board’s preliminary review found that the bills would lower revenues by some $370 million for the current fiscal year -- reflecting $563 million in costs and $193 million in offsets. It noted that government tax collections have been “relatively flat” over the past four years and are projected to decline in fiscal year 2026, suggesting softer economic growth.

The oversight board emphasized that while tax relief is desirable, any changes must be fiscally responsible and consistent with Puerto Rico’s long‑term financial plan. It warned that permanent rate reductions without recurring revenue replacements could jeopardize the fiscal stability achieved in recent years. The board also pointed to broader considerations, including expiring Medicaid funding in 2028, government salary demands and municipal funding needs.

Although the oversight board rejected the proposed tax cuts, it said one possible alternative could be offering a one‑time reimbursable incentive or rebate to taxpayers who would have benefited from the rate reductions -- an option that may align with available resources if structured carefully.

The board reiterated that it remains committed to working with the governor and Legislature on a comprehensive tax reform that addresses Puerto Rico’s economic and demographic challenges and strengthens its competitiveness.