PDP seeks reconsideration of inventory tax freeze

Rep. Héctor Ferrer Santiago, the Popular Democratic Party minority leader in the lower chamber

By THE STAR STAFF

Legislators from the Popular Democratic Party (PDP) in both chambers of the Puerto Rico Legislature are urging the New Progressive Party (NPP) leadership to reconsider House Bill (HB) 420, which proposes a three-year freeze of the inventory tax -- a key source of municipal revenue.

The PDP delegation warns that enacting the bill without a clear replacement for the lost funds could destabilize municipal finances and threaten essential public services.

Reps. Héctor Ferrer Santiago and Domingo Torres García, and Sens. Marially González Huertas and Luis Javier Hernández Ortiz joined their respective caucuses in calling for the bill’s return to committee for revision. Their appeal follows a joint resolution issued Friday by the Puerto Rico Mayors Association, which groups PDP mayors, and its NPP counterpart, the Puerto Rico Mayors Federation, along with the Municipal Revenue Collections Center (CRIM by its acronym in Spanish), demanding a responsible transition plan before any repeal.

“There is consensus, and we agree with the mayors’ demand: this tax cannot be eliminated without first identifying an alternative source of revenue,” Ferrer Santiago said. “Municipalities cannot lose such an important source of revenue without a responsible transition.”

The inventory tax generated $314.8 million in fiscal year 2024, funding critical services such as public safety, road maintenance, waste collection, sports programs and elderly care. PDP legislators argue that removing this revenue stream without safeguards would create a fiscal cliff for municipalities, with the burden ultimately falling on residents.

“In the PDP, we have always been clear: we support measures that alleviate the tax burden on the private sector, but this cannot be at the cost of destabilizing the municipalities,” Hernández Ortiz said. “No measure that affects municipal revenues should be approved without first ensuring that essential services to the people are protected.”

The mayors’ resolution proposes freezing the inventory tax for five years, from 2026-2027 to 2030-2031, using the 2024 tax year as a baseline. It also calls for a tax substitution mechanism that would guarantee recurring municipal revenue without imposing new taxes or increasing consumer prices.

PDP legislators emphasized their openness to maintaining a transition period but insisted that any repeal must be accompanied by a clear and sustainable fiscal plan. They urged the NPP majority to heed the bipartisan concerns of municipal leaders and revise the bill accordingly.

Legislative leaders Thomas Rivera Schatz, the Senate president, and Carlos “Johnny” Méndez Núñez, the speaker of the House of Representatives, have said HB 420, which proposes a three-year freeze on the inventory tax, will not be reconsidered by the Legislature.