The Real Reason Why Puerto Ricans Are Protesting Tax Reform

Mar 6, 2015
12:33 PM

A few things you need to know: tax stories are really complicated and quite frankly, a bit geeky. You should also know that Puerto Rico is on the brink of bankruptcy. I’m pretty sure that you haven’t heard about that fact, nor about the story that governor Alejandro García Padilla and his status-quo pro-Commonwealth Popular Democratic Party are trying really hard to push tax feform.

It sounds noble, right? Clean up the island’s tax system and get more revenue for Puerto Rico?

Remember, this is Puerto Rico we’re talking about, where politicians are synonymous with mediocrity.

At the core of García Padilla’s plan is a 16% value-added tax (VAT) that would essentially replace the island’s 7% sales tax. This is what Bloomberg reported last month when this was all going down:

The tax would be applied at each level of production and distribution and replace a 7 percent sales tax that consumers pay on goods and services.

The tax, which Garcia Padilla wants set at 16 percent, would begin as soon as it’s enacted by lawmakers, Zaragoza Gomez said. Under the plan, Puerto Rico would have a compliance rate of 75 percent, compared with about 56 percent on sales taxes, according to a KPMG LLC report released Feb. 4.

General-fund tax receipts would increase by $2.5 billion with a 16 percent value-added tax, assuming the 75 percent collection rate, according to the KPMG report. Representative Rafael “Tatito” Hernandez said the government may apply the tax to fewer items than were included in the KPMG report, which would produce less revenue.

But then something occurred along the way, besides the typial political opposition from the island’s pro-statehoood New Progressive Party: people who are very likely part of García Padilla’s camp started protesting.

Just yesterday, this happened in San Juan.

An small AP story published by Yahoo News adds more context: “Thousands of students, education officials and community leaders in Puerto Rico are protesting a proposed 16 percent value-added tax that officials say would strengthen the island’s economy.”

A lot of those who protested yesterday were speaking out against the idea that private education would fall under the VAT (or IVA, if you go by its Spanish acronym). García Padilla insists that private education, along with gasoline and prescription medicines, would not be taxed, but still, people are upset. VAT is not a plan getting many people excited.

Yesterday’s protest happened just a few days after a “No Consumption Day” and even though (no surprise) a lot of García Padilla’s political opponents (mostly those from the island’s pro-statehood party) are attacking this entire plan, the conversations that I have had with people on the island this week suggest that this has gone beyond typical partisanship. You think people on the mainland are sick of the political class? Visit Puerto Rico. It’s worse.

For example, take into account that a “Ni un impuesto más” (“Not One More Tax”) Facebook page has gotten over 20K likes in two days. That page is promoting a Sunday rally:


Of course you can see more at #NiUnImpuestoMás on Twitter, if you can get past the hijacking of the hashtag by the island’s political class. Nonetheless, today’s cover of El Nuevo Día sums up the frustration:


García Padilla insists that he will continue with his plan, and he also plans to address the island on TV. Just this morning, his party sent out an email basically evoking Luis Muñoz Marín in the first line, suggesting that the VAT is all about “social justice and equality.”

It’s more about paying off debts to Wall Street.

Minor detail.

This is where we are at right now for García Padilla: when faced with desperation and defending your party, roll out Muñoz Marín because what else do you have, right?

You would think that García Padilla would put Puerto Rico ahead of the stubborn defense of his political party and a colonial system that has created Puerto Rico’s economic and social ills. You would think a leader would understand that this push puts a burden on his own people (yet again) instead of taking the fight to where the real culprits are: a political class from all the island’s major parties that has allowed for this to happen and a U.S. Congress that silently watches with no real challenges at all from anyone in Puerto Rico’s political class. The sad reality is that García Padilla cannot accomplish this because he is a product of this very same political class and he’s just embracing a colonial political system he feels the need to defend. Why defend something that really isn’t working? Because García Padilla is the status quo, just like every other political leader in Puerto Rico today, no matter his or her view on the “status question.” Of course the governor is going to defend that.

The people of Puerto Rico demand respect, Mr. Governor, and instead of trying to keep your problems insular, how much have you really done to raise the issue that Puerto Rico’s problems are a direct result of 117 years of U.S. colonialism and decades of mediocre politicians who have allowed for such a relationship to fester and not prosper?

Instead of succumbing to the typical political fighting, why not fly to Washington, D.C. right now and start raising your voice some more? Bring a few of your political opponents with you. Make some noise, because I guarantee you that besides this opinion column and a handful of other stories, no one (and I mean no one) in the U.S. media cares about what is happening in Puerto Rico.

Let’s say it together: the colonial experiment is dead. VAT is just another short-term fix that will do nothing to solve the bigger structural issues. Like one friend told me who lives on the island, “Wait, I am paying more money to pay off a debt to some financial firm?”

Why can’t we begin to have that honest conversation and put away the politiquería?

Why do we keep defending Macondo?

Why are we trying to fix something that is no longer fixable?


EDITOR’S NOTE: Julio (Julito) Ricardo Varela (@julito77) founded in May, 2011 and proceeded to open it up to about 20 like-minded Rebeldes. A 1990 Harvard graduate in the History and Literature of Latin America, his personal blog,, has been active since 2008 and is widely read in Puerto Rico and beyond. He pens columns on LR regularly. In the last two years, Julito represented the Rebeldes on several outlets, including MSNBCCBSNPR,  Univision and The New York Times. Recently, he was a digital producer for Al Jazeera America’s The Stream.