The Illusion of Fairness: Part 1

As promised here is the follow-up on the “Incentives for the Payment of Taxes in Advance of the Tax Transformation Project Act.”  In this installment, I’d like to breakdown the provisions which allow for citizens to prepay taxes.

First of all, it should be crystal clear to everyone, that tax reform is coming to Puerto Rico.  There is no question whether the IVA will pass or not, it is only a matter of time.  How else can you explain the Puerto Rican government creating a process for citizens to prepay taxes?  I mean let’s get real here, it’s in the title of the new law.

Our old friend Occam’s Razor almost guarantees us that the only way to explain the creation of this new law is because it is a forgone conclusion that tax reform is coming.  I would go further to suggest that this law represents an unspoken covenant between the richest citizens of Puerto Rico and the Puerto Rican government.

Still not convinced?  Let’s just imagine that the tax reformation does not happen.  If that’s the case, then the Department of Hacienda has quite a mess on their hands.  They will have received payments for taxes, based on future tax rates that did not become law.  I guess they could simply refund the payments, that is, unless they really needed the cash (which they do).  What happens if the government spends some of the money?  Where will they get the money to make the refunds?

As I mentioned in the previous post, this program is aimed at a very selective group.  Here is a summary of the types of taxes eligible (PDF) and who would be likely to benefit from the discounted taxes.

Type of tax	Beneficiaries
Annuities	Owners of life or endowment insurance annuities
Capital Gains	Individuals, estates, trusts
Capital Gains	Corporations
IRA's and Educational IRA's	Individuals with IRA or IRA educational accounts
Dividend Distributions	Share holders of public corporations issuing dividends
Implicit Distributions	Corporations with accumulated earnings and profits

Secondly, as you can see, these discounted tax payments are aimed at any citizen with annuities, IRAs, and stocks.  In other words, these discounted taxes will benefit the richest of our citizens.

In addition, it is also aimed at companies large enough to have long term capital assets and those fortunate enough to have large profits.

I'm always suspicious of laws that claim to be doing one thing, but actually authorize something completely different. In this instance, the press release from the Department of Hacienda claims the governor signed into a law a tax amnesty program.  However, if you read the release or review the law (Ley de Incentivos para el Pago de Contribuciones en antelación a la Transformación Contributiva), you will realize that it also sets up a new program for the most wealthy Puerto Ricans to prepay taxes at discounted rates.

Moral outrage against inequality

The day before the first black president of the United States was inaugurated, millions celebrated the birthday of Dr. Martin Luther King Jr. While Dr. King is widely known for his nonviolent protest against black inequality, towards the end of his short life he began to widen the scope of his protest to include the inequality between the rich and poor.

Recently the new Executive Director of the Autoridad de Energía Eléctrica (AEE), Miguel Cordero, defended his salary of $250,000. His basic excuse was that's what he had received previously for the same position and that it was the same as his predecessor. I can understand that logic. It's simple and self-centered, in short human. However, Mr. Cordero, it is a moral outrage for you (and all of your peers in and out of government) to make this defense while our citizens are slaughtered on our streets and parents struggle to feed their children.

I've pointed out before and I'll repeat it again. Why is it that staff employees salaries here in Puerto Rico must be lower than their counterparts in the United States, but Senior Executive pay is nearly equal? How can anyone morally justify that their salary should be 1,000 times more than the average median income of a Puerto Rican family? It is a cruelty against society to imagine that a public servant of our bloated government makes the same as 100 Puerto Rico families!

Of course the "Junta de Gobierno de la AEE" approved this salary and that of his subordinates and predecessors. I bet that the board is composed of the same executives which have benefited from this misuse of the public's trust and confidence. I wonder how many staff employees, which are not on the board of the directors of the many unions working for the AEE, are on the "Junta de Gobierno de la AEE?"

James Lawson was a peer of Dr Kings and worked by his side to accomplish the removal of the oppressive treatment of blacks in the United States. When asked about the inauguration of President Barack Obama, he said,

"...if you do not deal with the socioeconomic, political forces that inhibit people to torture and cruelty, you can't make progress towards King's understanding of this society as one of liberty, equality, and justice for all."

Unfortunately, we the people of Puerto Rico are guilty for allowing this travesty, this inequality to continue. Since we do not see it as "oppression," the treatment of the middle and lower class by the "elite" leadership of our country, then do not band together to change this status quo. Doing nothing about this inequality is acceptance of that status quo. We are blinded by the illusion that we can gain entry into this "elite" inner circle. However, we are grossly mistaken! When the "best" candidate to receive these top salaries are the same people that have already retired from those very same positions, we need no further evidence that the rich take care of the rich.

I once read that history is a cycle of the rich sharing just enough with the poor to keep them complacent, until the poor rise and demand, through revolution, a fairer share. If Dr. King were alive today, I'm sure that he would warn us that we are teetering on the brink of another revolution. The poor of our island, of the United States, and the world are nearing a breaking point. Most of the crime, strife, and war are fueled by this inequality. How much more can we take?

If I were Dr. King, or Mahatma Ghandi, I would call for a protest against the AEE. I would cry out for houses all across the island to non-violently protest against this travesty. I'd call for them to write letters, stop paying their bills, stop using all inessential power, and even picket in front of the Forteleza, the Capital, and the headquarters of the AEE in Santurce. I'd call on us to commit ourselves to these ends until the leadership bends to the greater majority.

The saddest part of all of this, is that our society has allowed a minority, "the elite," to establish the "rules." We've forgotten the power of the majority, who, united together can seek liberty, equality, and justice. Imagine if we dedicated ourself to this goal? Imagine if we accepted all of the punishment the leadership of our island could inflict? Imagine what the world would think of this "new royality," when their cruelty and inhumanity is exposed for the entire world to see?

Yes, I do have a dream. I dream of a time when we can take the bars off our houses. When we can grow with the full knowledge that the ideals of hard work, honesty, courage, fair play, tolerance, and loyality, guarantee us that inequality such as we see witness by Mr. Cordero (and the leadership of our government and businesses) shall never be permitted again.