While doing my usual morning review of news regarding Puerto Rico I noticed a comment in a story about the island’s economic crisis. An author, whom I will not mention; stated that Puerto Rico is a perfect example of why low taxation doesn’t work. He stated the PR collects less than 8% of GDP in taxes and that was lower than even Haiti.
Please, what a useless metric. What a meaningless backdoor way to try to encourage an increase in already HIGH taxes.
Taxes to GDP ratio is a stat whose sole purpose is to lie. Real numbers are always better in addressing what the problems are. Here are a few:
- 950 thousand of Puerto Rico’s 3.5 million people are employed
- Of those, 285 thousand work for government.
- More than a million people receive public assistance.
The reason taxation appears low vs. GDP is because there aren’t enough people working to generate the kind of revenue needed to fund an over bloated government. PR raises nearly 9 billion dollars a year via various forms of taxation. I doubt Haiti comes even close to that. When you have a more efficient economy and government, you need less taxes and less regulation, which in turn creates more businesses and jobs.
What Puerto Rico must do to save itself ahead of any other consideration is to cut the size of its government and spending by 50%. Then LOWER taxes and ease regulations to make it easier to go into business and stay profitable.
Increasing taxes on the island has already been tried again and again and today it holds an even more dreary hard statistic, a debt of 110 billion dollars: 100% of GDP. That is the number to be concerned with.