By The Star Staff
New Progressive Party Rep. Carlos “Johnny” Méndez Nuñez called on the Financial Oversight and Management Board to reevaluate House Bill 1839, the bill that enables tax reform to give tax relief to the working class of Puerto Rico.
“The position of the Board on House Bill 1839 is not correct given the fiscal and economic reality of Puerto Rico,” the lawmaker said. “The past four years, together with the Senate, we established the guidelines for an economic resurgence focused on fiscal responsibility. This allowed us to reduce and even eliminate taxes. Now we can provide tax relief to the working class of the island, as well as our small and midsize businesses, the economic foundation of the island, and the Board should not deny that. I call on the Board to change its position and approve giving more money to our people.”
Méndez said the Treasury Department’s collections for July of this year exceeded $810 million, around $120.4 million more than projected by the oversight board.
According to the parameters of the reform, its impact for individuals and small businesses is estimated at over $590 million.
The oversight board said it believes that tax reform is essential for Puerto Rico’s return to sustainable economic growth but noted that House Bill 1839 would reduce government revenues by about $750 million this fiscal year and by almost $3 billion over five years.
“The bill threatens the Government’s fiscal stability,” the Board said in a statement Wednesday. “The substantial losses in revenue would push the Government’s budget back into deficit, erasing the progress made in recent years to stabilize Puerto Rico’s finances. It is significantly inconsistent with the Fiscal Plan for Puerto Rico, the current fiscal year budget, and PROMESA.”
The oversight board urged the Legislature not to send the bill to the governor for his signature, and urged the governor not to sign the bill into law.
“Instead, we encourage both branches of the government to meet with the Oversight Board to work together on a budget that adequately funds services, and on a tax reform plan that is affordable and leads to long-term economic growth for a Puerto Rico that is recovering,” the board said.
In prior years, the oversight board supported the government’s over $500 million-a-year expansion of the “appropriate and sensible” Earned Income Tax Credit that is matched by the federal government, benefited low-income households, and incentivized more residents to rejoin the formal economy.
“We continue to be open to discuss fair and effective tax proposals,” the oversight board said. “The tax bill the Legislature rushed through voting last night, however, was not sufficiently evaluated for its cost or economic impact. Cutting taxes should be based on data, not politics, and with a thorough discussion and evaluation of the impact on government finances and the economy overall.”
“Fiscal irresponsibility resulted in painful adjustments to government spending,” the oversight board added.