Puerto Rico’s needs in Washington are urgent.
The U.S. territory’s federal Medicaid funding will run out this month. Congress hasn’t passed a disaster relief bill since October. And as Hurricane Maria fades out of the daily news cycle, pushing lawmakers to act through lobbying is one arena where the Puerto Rican government can exert influence.
But Puerto Rico’s government-appointed lobbyists in Washington failed to change the island’s corporate tax status after asking at the last second; the governor urged Congress in November to authorize $94.3 billion in disaster relief — a massive sum that a Republican-controlled House and Senate isn’t likely to approve — and Puerto Rican leaders recently began a statehood blitz on Capitol Hill that even supporters in Washington say has no hope of success.
The nearly year-long negotiations on the massive tax bill in Congress are a window into the Puerto Rican government’s inability to influence the levers of power in Washington, and Hurricane Maria along with the island’s lack of voting representation in Congress aren’t solely to blame.
After failing to get legislative victories, Gov. Ricardo Rosselló attacked Republicans who agree with him on Puerto Rican statehood, including Florida Sen. Marco Rubio. Rosselló vowed to use the expanding Puerto Rican diaspora in states like Florida as political leverage in the 2018 elections.
But while Rosselló has started spending time in Florida, his office in Washington has yet to successfully influence major pieces of legislation.
The Puerto Rican Federal Affairs Administration, PRFFA, a Washington-based group of Puerto Rican government officials tasked with representing Rosselló’s interests on Capitol Hill and the White House, constantly shifted legislative priorities throughout negotiations on the tax overhaul, which made it difficult for members of Congress to understand the island’s needs, according to multiple congressional offices.
PRFFA executive director Carlos Mercader, a Rosselló appointee, said the group’s position on taxes “was conveyed throughout the process and it has never varied, to this day.”
“PRFAA never shifted the goalposts,” Mercader said in an email. “On the contrary, it addressed different provisions as they were put forward by Congress.”
Weeks before the tax bill became law, Rosselló’s lobbyists began to argue that the bill treated companies in Puerto Rico as foreign entities under the revamped tax code, putting them at a competitive disadvantage compared to their mainland counterparts. But the push came too late and wasn’t a feasible request, according to Republican and Democratic lawmaker offices who work extensively on Puerto Rican issues.
When the corporate tax change failed, Rosselló went on the offensive, publicly criticizing Republicans like Rubio for turning their backs on Puerto Rico in its time of need, three months after Hurricane Maria destroyed the island’s entire electrical grid.
Rubio said Rosselló’s office raised objections about corporate taxes in Puerto Rico just over a week before the bill passed the U.S. Senate, adding that “the bulk of their engagement was always with the disaster relief, and rightfully so.”
But, Rubio added, “it remains to be seen” whether the corporate tax changes will have the negative affects on Puerto Rico that Rosselló claims.
Rosselló isn’t happy that the tax bill imposes a 12.5 percent tax on “intangible assets” of U.S. companies abroad and a minimum of a 10 percent tax on companies’ profits abroad. The measure in the tax bill is designed to stop American companies from avoiding taxes by shifting profits overseas. But it would also apply to Puerto Rico because the island is treated as both a foreign and domestic entity under the U.S. tax code.
“We will analyze those who turned their back on Puerto Rico, who passed a bill that goes against the spirit of the law,” Rosselló said in December.
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