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Dow Jones International News

Puerto Rico Governor, Businesses To Seek Federal Tax Break

March 6, 1999
©Copyright 1999 Dow Jones & Company, Inc.

SAN JUAN, Puerto Rico (AP)--Gov. Pedro Rossello and Puerto Rico 's most influential business group are joining forces to try once again to lobby for a job-producing federal tax break shot down by Congress in 1996.

With the issue of statehood for Puerto Rico on the back burner after voters rejected that option in a December referendum , Rossello, the leader of the pro- statehood movement, has again come out in support of a tax break closely identified with Puerto Rico 's territorial status.

Rossello and the Puerto Rico Manufacturers Association said Thursday they will lobby together to try to revive a measure known as Section 30a that provides a federal tax break to U.S. companies with operations in Puerto Rico, based on the amount of wages they pay to islanders.

Congress voted in 1996 to phase out a larger package of tax breaks that includes 30a.

With a per capita income half that of the poorest state and an unemployment rate three times the U.S. average, Puerto Rico needs federal incentives for companies to create jobs, the manufacturers group argues.

"We are working together on this agenda and I feel optimistic about the results," Rossello said a press conference.

Few others are optimistic, however. The Republican majority in Congress flatly rejected any continuation of tax breaks for Puerto Rico in 1996, despite Puerto Rico's lobbying efforts then.

While supporters of Puerto Rico's commonwealth status see the federal tax breaks as a cornerstone of U.S.- Puerto Rico relations, others consider them incompatible with statehood.

Not so, said Jaime Morgan Stubbe, the director of the government's industrial development agency.

"Whether a state could have a special treatment, my answer is yes," he said. "There are precedents. That would have to be a subject of negotiation during the transition period to statehood."

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