Tanzina Vega: Last week, super rich YouTube influencer, Logan Paul, announced he was leaving California and moving to Puerto Rico. His main motivation? Avoiding what he sees as unnecessarily high taxes in the Golden State in favor of Puerto Rico's considerable tax breaks. Paul is not alone. For years, the wealthy have swarmed to Puerto Rico to profit off of tax exemptions that don't extend to native Puerto Ricans, and while the island is still in an economic crisis, there are concerns that these types of investors will turn Puerto Rico into a gentrified tax haven for the rich.
Joining me now to break this down is Yarimar Bonilla, professor of Puerto Rican studies at Hunter College and the CUNY Graduate Center. Yarimar, thanks for joining us.
Yarimar Bonilla: Thanks for having me.
Tanzina: Tell us about this, is it a trend? Are we seeing a wave of rich, mostly folks from the mainland, moving to Puerto Rico post-Maria?
Yarimar: Well, I think there's been a new wave post-Maria, but really, it started with the debt crisis and as a result of certain measures that the local government put into place to attract newcomers to the island. This was around the time when Wall Street stopped lending money to Puerto Rico and there was search for new ways of bringing influx of cash to the island.
Tanzina: There are tax laws that are meant to incentivize investors to come to the island. What can you tell us about those?
Yarimar: Puerto Rico has always been a site for speculation and investment on the part of US residents and Wall Street, so forever Puerto Rico has been a place where there can be loopholes and ways of really tax dodging. It used to be mostly for companies that would come and set up shop and and be able to pay lower wages than in the US, and on top of it not have to pay the same level of capital gains taxes. Now, with this new law, this also extends to individuals. The idea was that with a small number of very high net worth individuals, we could have a big influx of cash.
But it has extended beyond a small number of high net worth individuals and it's been growing and growing and having certain impacts on the island that folks are starting to become really worried about.
Tanzina: Yarimar, I had family members who worked for some of the major corporations that went to Puerto Rico decades ago to set up shop under the corporate tax haven laws that you mentioned. Some of those tax haven laws have since expired, haven't they?
Yarimar: Yes, during the Clinton administration, they started to be slowly phased out and that was a key part of what caused and triggered the debt crisis. After those corporations left, there are lots of parts of Puerto Rico that feel like ghost towns, empty [unintelligible 00:02:57] and those jobs have never really come back.
Tanzina: Now we're putting the onus on individual investors to come to the island. What we're hearing a lot, Yarimar, is that these folks are really going there and creating, essentially privatizing much of what's available on Puerto Rico and taking advantage of the fact that the island is in such a delicate economic position. What are you seeing there?
Yarimar: It's good that you bring the word privatized, because that really is a lot of what they're interested in. These are folks that to a great extent kind of don't believe in government, so for them the island's weak government and its non-sovereign relationship to the United States is beneficial. They don't like too much regulation, they certainly don't like to pay taxes, and so they're folks that don't care, for example, if the roads aren't working, if there's not good health care, because they have the means to get around that.
As they come, they don't contribute to the local coffers here in Puerto Rico and so the folks who can't afford for example, to turn their homes into a self sustaining solar powered bunker, have to deal with the increases in utility services. The folks who can't afford to have 4x4s, who need for example, public transportation, they're the ones who are really going to pay the price of the weakening of the Puerto Rican state economy.
Tanzina: Yarimar, one of the things that is standing out to me is Puerto Rico is already a colony of the United States and that colonial relationship with the United States is one that has been fraught for decades. The idea that mostly white wealthy investors are coming to the island, to me, reeks of a new type of new colonization of the island. Your thoughts.
Yarimar: Absolutely. Just this week, one of our local legislators talked about this as a kind of tax apartheid. There's this creation of two different societies. In some ways, it feels like the kind of colonial settlement that the US was never really able to fully implement in Puerto Rico. Initially when the US acquired the island, it changed the name to Puerto Rico, it tried to Americanize it, implement English in schools, et cetera, and there was a lot of push back. With the the Commonwealth status, whatever one might think of it, there was certainly a strong push to maintain Spanish language and a cultural distinctiveness, to make up a word, but now it seems like there's finally a kind of settlement that is happening.
You see people really accommodating these new American arrivals and some of them think that we should speak English. A lot of them want to really change what's here, which is kind of the classic gentrification tale, where they're attracted initially to the cultural diversity and what's different about Puerto Rico, then as soon as they get here, they want to change it. They have all these ideas about how to disrupt it, to use the Silicon Valley speak, or to just transform it to better suit their needs.
Tanzina: All while leaving out Puerto Ricans who are on the island.
Yarimar: Absolutely, and in some things, of course, they are correct. Nothing is black and white. They do have a lot of concerns about government corruption, about the bureaucracy in Puerto Rico, all of that is true, but they don't have any interest in building greater autonomy for Puerto Rico, and certainly not in Puerto Rico becoming a state, because that would eliminate all these loopholes for them. What is beneficial for them is for Puerto Rico to continue to be a colony. Colonialism benefits them.
I've interviewed some of these folks and I've asked them what it feels like to move to a colony, what it feels like to not be able to vote for the president, for example, and none of that really interests them. Partly because for them, the way they influence politics is not at the ballot box, but by donating to campaigns. That's something that folks here are also worried about. To what extent are they going to start donating to local politicians and really influencing public policy in a way that's disproportionate to their presence on the island, to their demographics?
Tanzina: Yarimar, has the PROMESA oversight board, the financial oversight board for Puerto Rico, encouraged this type of behavior, and what about the Governor Pedro Pierluisi?
Yarimar: Pedro Pierluisi has not made too many statements about these communities, and in some ways this was started, was the kind of brainchild of a previous pro-statehood administration, under Fortuno, but it's been a kind of bipartisan thing here because it was put into place by a popular democratic politician. It's really only been the pro Independence Party that has spoken out consistently against them, so it's not really- it kind of swings in multiple directions.
The fiscal board has not said too much about them, but the IRS is looking into this program and has been carrying out investigations to see, first of all, if indeed these folks live here, because many of them only have to live here for six months out of the year, and many of them really keep close track of that, because they have no interest in staying not even one day past the six months. A lot of them also are constantly looking for loopholes to not actually be here. Like every time there's a disaster and there's a declaration of a disaster, they don't have to be here and they're quick to leave.
They have all these apps and spreadsheets and different ways of tracking the very last hour they spent here, and so the IRS is interested in getting the funds that they're not getting from these folks.
Tanzina: Yarimar, what's happening to me, I still have family on the island. Here on the Takeaway, we went to the island one year after the devastation of Hurricane Maria to do in depth reporting on what was happening there. I already started noticing this shift happening then, but with gentrification, with white wealthy investors coming to the island, that also changes things culturally. We saw that happen here in New York City with gentrification, where Black and brown communities were gentrified and then essentially almost disdained for living in their own communities. Is that playing out in Puerto Rico right now, in terms of the cultural shifts that we're seeing?
Yarimar: Yes, absolutely. Some folks say, "We don't need to worry about this because these communities are concentrated in certain enclaves." Everyone talks about Dorado or Palmas Del Mar, but they're expanding. It's classic gentrification where you have the "pioneers" who begin to create a safe community in little pockets where English is spoken, where you have English private schools and they're able to create a community.
But now people are moving to the edges of those communities and expanding out more and more, because also they're finding good deals on land. Post Maria this has just increased. In many ways, Maria was a kind of global ad for Puerto Rico. A lot of people were like, "It's cheap there and I can go and take advantage of all these incentives," and basically disaster capitalism.
Interviewer: Yarimar, are Puerto Ricans themselves taking back some of their land?
Yarimar: Well, they certainly would like to, but there's a debt crisis, there's an economic crisis, there's a housing crisis. Not everyone can purchase a piece of beach front property and pay for it all in cash. Sellers will go with the highers bidder and especially those who don't have to finance that.
Interviewer: Yarimar Bonilla is a professor of Puerto Rican studies at Hunter College and the CUNY Graduate Center. Yarimar, thanks so much.
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