Puerto Rico Economic Pulse ©

February 2006: It is time for answers

An economic analysis of PR’s tax reform proposal

Under the watchful eyes of the credit rating agencies, a reshaping of our tax system has been proposed. Here we consider, the effects on several critical economic variables, including investment, consumption, and government spending, implicit in the new plan. We also point out some unanswered questions about the tax reform proposal. It is surely time for the elected representatives of all the political parties to ask whether the proposed measures do offer hope of dealing effectively with crucial problems facing Puerto Rico. Although we do not have all the answers, we feel that the important questions have been left out of the debate. Specifically, who is the biggest winner, and who will lose out?