Governor submits 2nd phase of tax reform to Legislature

Gov. Jenniffer González Colón

By THE STAR STAFF

Gov. Jenniffer González Colón has submitted the second phase of her Tax Reform to the island Legislature, with the aim of providing real relief for Puerto Rico’s middle class during the upcoming tax filing cycle in April.

“This is about giving people back the fruit of their effort, creating more competitive conditions for economic development, and moving forward responsibly,” the governor said.

The second phase of the reform introduces several significant changes aimed at easing the burden on Puerto Rico’s middle class, the governor noted. The deduction per dependent will double from $2,500 to $5,000, and tax rates for working families will be lowered without eliminating existing benefits. The highest tax rate of 33% will now apply only to incomes above $150,000, which affects less than 0.2% of the population.

Additionally, González Colón said, the tax system will be simplified by removing complex rules, making compliance easier and reducing costs. The reductions will be funded through savings in public spending while ensuring essential services remain unaffected.

According to estimates, the changes will result in tangible savings for taxpayers. For example, a single service technician with one dependent earning $23,768 annually will save $399, reducing taxes from $565 to $166. A married secretary filing separately with three dependents and earning $32,139 will save $505, lowering taxes from $1,023 to $518. Similarly, a married social worker with one dependent earning $55,370 will save $1,206, cutting taxes from $4,161 to $2,955.

“With this Tax Reform, working families will have more money left over,” the governor emphasized.

The first phase of the reform, already in effect, includes 10 laws from the 14 bills originally sent to the Legislature. Those measures provide benefits such as expanded tax exemptions for nonprofits, simplified filing processes, exemptions for bona fide farmers, and full IVU exemption on prescription medications. Other laws promote savings for education and retirement, allow ABLE accounts for people with disabilities, and exempt capital gains from the sale of a primary residence.

A dozen and a half new proposals

In addition to the second phase of the Tax Reform, the governor submitted 18 new measures to the Legislature on Monday, including one allowing voluntary prayer breaks for public employees, another extending the appointment terms of certain justice system officials to 16 years, and a third recognizing a fetus as a person.

The first proposal, known as Bill 105, would permit all public employees to take up to five minutes of voluntary reflection or prayer during their workday. Supporters argue the measure promotes mindfulness and personal well-being, while critics warn it could blur the lines between church and state.

Another high-profile initiative, Bill 92, seeks to extend the term of appointment for registrars and prosecutors from the current limit to 16 years. The administration says the change would provide greater stability and continuity in the justice system. However, opponents fear it could reduce accountability and concentrate power for too long in the hands of appointed officials.

The governor’s package includes measures addressing domestic violence, corruption, campaign finance, and public safety:

Bill 88: Creates a municipal liaison for domestic violence and women’s issues, serving as a first point of support for victims.

Bill 89: Amends Puerto Rico’s Domestic Violence Prevention Law to strengthen legal protections and improve prosecution mechanisms.

Bill 90: Increases penalties for threats under the “revenge porn” statute.

Bill 91: Establishes a regulatory framework and digital registry for all-terrain vehicles.

Bill 93: Eliminates the Advisory Board for the Handicraft Development Program, which has never been constituted in 30 years.

Bill 94: Updates the Industrial Commission’s funding structure to allow greater financial independence from the State Insurance Fund.

Bill 95: Prohibits campaign financing from foreign legal entities.

Bill 96: Expands the role of the Special Investigations Bureau in anti-corruption efforts.

Bill 97: Strengthens the “Experience” program, offering educational and recruitment opportunities for youth aged 15 to 18.

Bill 98: Amends the Civil Code, defining a conceived fetus as a human being at any stage of gestation.

Bill 99: Repeals Article 44 of the Political Code to protect the principle of favorability.

Bills 100 & 101: Rename public spaces in honor of notable figures, including the Diagnostic & Treatment Center in Culebra and the Plaza del Quinto Centenario in Old San Juan.

Bill 102: Adds temporary guardianship provisions to the Adult Rights Charter for protective orders.

Bill 103: Expands victim compensation eligibility to include victims of human trafficking.

Bill 104: Clarifies Civil Code criteria for grandparent and aunt/uncle relationships with minors.