Puerto Rico Sales Tax Increase

Reporting on the Puerto Rico economic “crisis” is increasing and the NY Times went so far as to report the “despair and anger”.  Everything I have read is grossly exaggerated from what I witnessed in person while on the island.

Fairly decent synopsis of the situation – background information of the problems explained pretty well.

Costco two days before the sales tax increase (Monday mid-afternoon) was packed.  The parking lot was full and required circling a couple times to find a spot at the far end of the lot.  Approaching the door, we witnessed a freshly purchased flatscreen TV being wrapped to the top of a sedan – the TV was larger than the roof!  Walking through the electronics section, the purchased TV was “on sale” for $2000 and I watched 3 more bought within the hour along with many big-ticket items.  Most shoppers had full carts and some were pushing 2 full carts out the doors.

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Costco Carolina, PR parking lot after sales tax increase

One day after the sales tax increase (Thursday early afternoon) there were more open parking spaces and fewer big ticket item sales at the same Costco, just outside of San Juan in Carolina.  The lines were short, and shopping carts contained fewer items.  It makes sense that people would splurge on a few high-priced luxury items before the increase and have smaller purchases days later.  It is difficult to determine from our limited experience, if commerce actually decreased after the sales tax, but the purchases we witnessed before the increase appeared to be a bump.

Costco checkout lines after sales tax increase
Costco checkout lines after sales tax increase

The sales tax increase appeared to be accepted as another inconvenience that Puerto Ricans are painfully used to.  The island did not shut down.  People were not panicked in the streets.

This additional tax burden will have long-term ramifications for lost jobs, businesses closing, and people moving away from the island.  The cash based gray markets are going to increase as the islanders try to cope with higher taxes and avoid them as much as possible.  Many people are likely going to join the many islanders already receiving government assistance, few will be able to break out of this cycle.  This is not going to be an easy adjustment, nor a quick fix to better economic days.

I have hope for Puerto Ricans. They are intelligent, resourceful, proud, positive people.  Mainlanders can support the island through tourism; it is a gorgeous island to visit and a less expensive option than Hawaii or other Caribbean islands.  No visa is required, PR is a US territory.  The currency is US dollars.  Most people speak English and Spanish.  The beaches are beautiful and clean.  The food is amazing!  PR should be on everyone’s bucket list to visit!

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