Tuesday night after the New Hampshire primary, US Presidential candidate Andrew Yang dropped out of the race due to his poor showing.
If you’re not familiar, Andrew Yang famously proposed a Universal Basic Income for all US adults: everyone would have received a “Freedom Dividend” of $1,000 a month under his plan, funded through a national sales tax.
This means that everyone would be paying more tax, but then that tax money would come back to you through this ‘freedom dividend’.
This strikes me as incredibly inefficient. Instead of taxing people and then giving them money, why not just cut their taxes and let them keep their own money?
Of course, that’s never going to happen in a Bolshevik regime. But slashing your tax bill is totally an option here in Puerto Rico.
Puerto Rico’s many generous tax incentives include a 4% corporate tax rate on qualifying business income– anything that’s considered a ‘service’ which can be ‘exported’ outside of Puerto Rico.
This includes things like telemedicine, consulting, marketing services, accounting, sales, management, and countless other activities. Just about any self-employment profession or business idea can find some element that would qualify.
You can earn unlimited business income under this incentive program, and that income is subject to just 4% profits tax (plus a small municipal tax that is practically a rounding error).
And once you pay that 4% profits tax, you can put the rest of it in your pocket TAX FREE.
This is really unusual. In the US (and most other countries), corporations first pay a corporate profits tax. This is now 21% in the Land of the Free, down from 35% a few years ago.
But after you pay that corporate tax, you then have to pay an additional dividend tax of potentially 20%, plus the 3.8% Obamacare surtax.
This makes the effective federal tax rate in the US as high as 40%. And that doesn’t even include state or local taxes.
In Puerto Rico it’s just the 4%. There is no dividends tax. So once you pay that ridiculously low corporate tax, you keep the remaining 96% tax-free.
This is interesting because, according to IRS data, the top 50% of taxpayers in the Land of the Free pay about $18,000 per year in federal tax. That works out to be $1,500 per month.
(The bottom 50% don’t really pay anything…)
But by slashing your taxes with Puerto Rico’s tax incentives, you could easily (and legally) take back a big chunk of that $1,500 per month that you’re currently paying.
This is far better than waiting for the government to pay you a Universal Basic Income. With Puerto Rico, you can make your own Freedom Dividend.
Best of all, this tax incentive is available to EVERYONE… whether you’re from the US mainland, or right here in Puerto Rico, or you were born and raised in Bangladesh. It doesn’t matter– this Puerto Rican tax incentive is available to everyone on the planet.
It’s truly equal opportunity.
Puerto Rico, of course, does have its problems… I haven’t exactly been shy talking about the island’s pitiful infrastructure.
But on the balance, the tax incentives far outweigh minor conveniences. Plus you’ll never be cold again.
If you want to learn more, we just updated our in-depth article on Puerto Rico and its tax incentives, including my own personal experience moving here. Check it out to see what’s new in 2020.