As you may know, several years ago, Peter Schiff relocated to Puerto Rico. Have you ever wondered why? What are the advantages? And what can his move teach us more generally about economics and politics?
Peter recently appeared on the Puerto Rico ICON Podcast and answers some of those questions.
The primary reason Peter moved was the tax benefits of operating a business in Puerto Rico. He’s not subject to federal income tax, which is a huge economic incentive. As Peter put it, the more expensive they make it to stay in the US, the more attractive they make it relocate to Puerto Rico.
Peter discussed the possibility of Puerto Rico statehood. He said he thinks it’s a bad idea. For one thing, it would take on part of the federal government’s $23 trillion debt.
The United States is much more heavily in debt that Puerto Rico. So, Puerto Ricans would compound their debt problem by joining the United States.”
And of course, the biggest downside for Puerto Ricans is that they would be subject to the federal income tax.
As somebody who has been subject to that tax, you don’t want that. I mean, you don’t want IRS agents descending on Puerto Rico. That’s not how to invigorate the Puerto Rican economy – to infest it with IRS agents.”
Peter said the best thing for Puerto Rico would not be adding more government through statehood, but actually shrinking the existing government.
We need less government here in San Juan, not more government coming from Washington D.C. So, we can focus on making government smaller and freeing up more resources to the private sector and reducing taxes even further.”
Peter said big government is one of the problems facing the mainland US. The Trump administration has played lip-service to shrinking government, and it did lower taxes. But it’s given us higher deficits.
So, we’re borrowing to pay for bigger government instead of taxes to pay for bigger government. But the bottom line is it’s the bigger government that is undermining real economic growth and rising living standards.”
Peter said getting politicians to lobby for money and government programs isn’t the pathway to prosperity.
We want private enterprise. The absence of the IRS, a lower tax rate, that is much better for economic growth than having politicians who can try to get more government money redirected back into government programs in Puerto Rico. That is not what is going to grow the Puerto Rican economy. I lived in Connecticut. I had congressional representation. I left that. In fact, my congressman didn’t represent me at all.”
If you’re not sending money to Washington, you don’t have to beg to get it back.
So, I would rather let the people in the 50 states fight over those crumbs. We don’t need those crumbs. We could just keep all of our money and not have to lobby Congress to get some of it back.”
Ultimately, all governments are inefficient.
That’s why you don’t want the government doing things. You want the free market to do things because they will be efficient. They will control the costs and continuously improve the quality — the opposite of what government does.”
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