They can move to Puerto Rico.
That’s all there is to it? Yes.
Puerto Rico has been a great tax haven for Americans for decades. I had a Puerto Rican official speak at one of my conferences 25 years ago on this. Any firm that employed up to five Puerto Ricans could avoid federal income taxes. That’s why so many large American firms deliver goods from Puerto Rico.
A year ago, the Puerto Rican government upped the ante. If an American moves there, he need not pay capital gains taxes on future profits.
Multi-billionaire John Paulson is considering making the move. I don’t blame him. All he has to do is move out of New York City. No more Governor Cuomo. No more Nanny Bloomberg.
Are rich Americans moving there? Yes.
Most Americans have never heard of any of this. But today Matt Drudge ran stories on it.
Legally, Puerto Rico is part of the United States, but it has a separate tax jurisdiction. It has long been a tax haven for American corporations. Now it has become a major tax haven for citizens.
It caters to the rich. And why not? Poor Puerto Ricans have been moving to New York City for 70 years. Why not get a lot of billionaires from New York City to move to Puerto Rico? It makes sense to me!
Here’s the deal.
The Puerto Rican tax law provides a boon for someone like Paulson, who earns most of his money from investments. The federal rate for top earners in the U.S. is 23.8 percent on long-term capital gains and dividends and 39.6 percent on ordinary income, which includes short-term gains and interest. State and local taxes can push the marginal rate for rich New Yorkers higher.
Under the Puerto Rican law, any capital gains accrued after a person moves there would be tax free. . . .
In addition, new residents can benefit from another new law that taxes business income earned in Puerto Rico at 4 percent.
You know what else I enjoy about this story? It was reported on Bloomberg!