A calm Caribbean region embroiled in the eye of Congress has for decades been a safe haven for tax-dodging cryptocurrency investors. New York’s Representative Nydia Velázquez has recently proposed Puerto Rico tax-cryptocurrency legislation that would revoke the island’s status as a crypto tax haven, which would compel rich digital asset investors to pay municipal and US capital gains taxes.
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Its incentivizing 2012 tax exemption acts 20 and 22 have turned Puerto Rico into a household name for people and businesses in the cryptocurrency and blockchain technology world. Act 60 attracts high-profile investors and businesses alike, including Pantera Capital’s Dan Morehead, venture capitalist Brock Pierce, and social media influencer Logan Paul. These laws practically enabled residents to not only avoid but also significantly reduce taxes on capital gains from digital assets.
A Congressman’s Crusade: Ending the “Tax Haven”
Puerto Rico’s economy and its residents have not benefitted, as Velázquez argues, from the wave of crypto investors. “This wave of crypto investors hasn’t helped Puerto Rico’s recovery or strengthened the local economy,” Velázquez said, citing a Bloomberg article. This, she asserts, is making these issues worse by increasing the already high housing prices, displacing locals, and adding more stress to an island where almost 40% of people live below the poverty line.
The Cost to the Federal Coffers: Billions in Lost Revenue
Marko Koodrin’s Potomac-based firm did not work on this report but has worked with Velazquez’s office, claiming to estimate the potential loss of federal tax revenue due to Puerto Rico’s incentives. Preliminary estimates have suggested that Puerto Rico could lose about $4.5 billion in taxes between 2020 and 2026. This ponen pago forbes parte elosision puertoreno el novenomariosamerencial island recalrs undersore tax havens susceptible domininos, eh el ofmarko voidetario perspective. The stunning number also reveals the loss of Venezuelan, Dominican, and Cuban printing presses, so pre-ostracized Caroren Recabadores in the Dominican Puerto Rico Bay Lops region.
A Governor’s Counter-Proposal: A Smaller Slice of the Pie
Tax haven dismantling, intensively pushed by Velázquez, had equally contradictory proposals for Puerto Rico’s sustainability. Puerto Rico’s Governor Jenniffer González-Colón counters with extending Act 60, allowing tax relief until 2055 rather than 2035, proposing a condition for new applicants at 4% capital gains tax. Although the fraction seems steep, surrendering anywhere from ~4% to 37% of traditional US taxes would be relief.
An Uncertain Future: Political Obstacles in Congress
The legislative prospect of Representative Velázquez is still unresolved at this stage. Navigating as a Democrat in a Republican House and Senate, the bill is likely to encounter heavy winds politically. Both chambers are expected to engage in stalemate vote sessions focused on stablecoin and cryptocurrency governance scheduled for Velázquez’s timeline, along with several months’ windows targeting the legislative toolbox, which is likely to mandate smoother off-ramps for toolbox sessions.
A Clash of Economic Visions: Recovery vs. Revenue
The discussion about Puerto Rico’s crypto tax incentives illustrates a significant clash of economic visions. Supporters of the tax haven state that it draws investment and stimulates economic activity on the island, which aids in its recovery. On the other side, critics such as Representative Velázquez argue that it primarily enriches the wealthy, harming local residents and the U.S. Treasury. The next couple of months will answer whether the attempt to remove Puerto Rico’s title as a crypto tax haven garners support in Washington.
