Move over, Cayman Islands. Puerto Rico is now courting millionaires and billionaires by offering new tax incentives for American corporations and wealthy individuals. Those incentives can help slash federal income taxes on interest and dividends from 33 percent to zero and effectively eliminate the 10 percent tax on capital gains.
Puerto Rico is a commonwealth of the United States, but for tax purposes, it is treated differently. Most residents, with the exception of federal employees, already pay no federal tax. A person needs to live 183 days a year on the island to become a legal resident.
“The new tax incentives likely will be considered more broadly by some taxpayers as a new opportunity for income shifting and tax deferral,” Michael Pfeifer, an international tax lawyer at Washington-based Caplin Drysdale, told The New York Times.
The tax breaks come at a time when lawmakers are attempting (once again) to close loopholes that allow corporations to move their profits offshore to avoid paying U.S. taxes. Several bills have been introduced, but aren’t likely to be considered until Congress takes up tax reform later this year. - Read more at The New York Times
COLORADO GEARS UP FOR WEED BOOM Since Colorado voters approved a measure legalizing the recreational use of marijuana last November, the state’s pot producers and retailers have been gearing up for what they estimate could be a multi-billion dollar industry. According to the Colorado Legislative Council, medical marijuana dispensaries sold $186 million worth of cannabis last year. With the new law, they expect that number to rise to $920 million. However, several roadblocks still stand in their way as marijuana use is still illegal under federal law. Many have not been able to get loans from banks, and fear the federal government will seize millions of dollars they have invested, or worse, send them to prison. - Read more at The Washington Post
NORTH KOREA THREAT COULD COST U.S. $100 BILLION While the Obama administration has been scaling back the Department of Defense’s budget, new (almost weekly) threats coming out of North Korea could force the White House to change their spending habits at the Pentagon. “In 2010, President Obama… scaled back the Airborne Laser defense program and eliminated a program that created interceptor missiles. He also cut $1.4 billion from the Missile Defense Agency’s 2010 budget and eliminated missile shield programs in Poland and the Czech Republic,” writes The Fiscal Times’ David Francis. “But as North Korea emerges as a nuclear power, and other rogue states like Iran continue to pursue nuclear weapons, additional money will likely be needed to maintain a nuclear deterrent.” - Read more at The Fiscal Times
FHFA TO BAN BANKING INCENTIVES The Federal Housing Finance Agency is filing a notice today banning a practice used by insurers called “force-placed insurance” that gives lucrative incentives to banks that give out high-priced homeowners’ insurance policies to borrowers. Critics of the policy say the incentives prompt banks to arrange more expensive homeowners' policies than necessary. The FHFA says banning fees and commissions will help lower the price of insurance policies. The ban will apply to all mortgages guaranteed or owned by Fannie Mae and Freddie Mac, which is roughly half of the housing market. - Read more at the Wall Street Journal
- Follow us on Twitter at @DebtandTaxes and Brianna Ehley at @briannaehley
- See More Debt and Taxes here
