Puerto Ricans Suffer as Creditors Feast on Debt Colony

February 17, 2016
Puerto Ricans Suffer as Creditors Feast on Debt Colony

by Matt Peppe

Just an hour before my wife an I landed in her native Puerto Rico last month, the island’s government had defaulted on $1 billion in bond interest payments. It was the second default in five months for the cash-strapped government whose debt now totals $72 billion. None of this was evident as we waded through the crowds in Rafael Hernández airport in Aguadilla, which had been converted into a civilian airport after the closure of Ramey Air Force Base 40 years earlier. People hugged their relatives, welcoming them back home or bidding them farewell. It was a normal scene you’d see at any airport in the world. But the situation in Puerto Rico is not normal, and you don’t have to spend long there to see how regular people are suffering more every day under the crushing burden of debt.

You notice every time you make a purchase at the store or get the check at a restaurant. The sales tax in Puerto Rico now stands at 11.5 percent, after being raised 64 percent in July from 7 percent. The measure was approved by the island’s governor, Alejandro García Padilla, in conjunction with a package of austerity measures to raise money to pay the interest on the island’s debt to creditors.

This might not sound like an astronomical amount, but the impact is felt more in Puerto Rico than it would be in any of the states. Sales taxes are regressive. People with lower incomes spend more of their earnings on things that are taxed than those who can afford to store their income as savings. This means the lower your income, the harder you will be hit by the sales tax.

Puerto Rico’s median average income of less than $20,000 is 50 percent less than the poorest American state. For families already struggling to pay the bills on such meager earnings, the additional sales tax burden is eating away their little disposable income, or worse, forcing them to borrow to pay for their basic necessities.

More:
http://www.counterpunch.org/2016/02/17/puerto-ricans-suffer-as-creditors-feast-on-debt-colony/