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Puerto Rico’s governor is warning that the sweeping tax plan passed by congressional Republicans on Wednesday could deliver a “crippling blow” to the island’s already-fragile economy, still reeling from the effects of major hurricanes.

Gov. Ricardo Rosselló (D) is calling on lawmakers to rewrite a key part of the tax bill that he says might cause the island’s hefty manufacturing sector to contract, jeopardizing hundreds of thousands of jobs. Supporters of the tax bill who track Puerto Rico’s concerns closely said they are hoping to make minor changes to the new law — but that the new business tax is likely to survive.

The tax bill passed overwhelmingly in the House on Wednesday includes a new 12.5 percent tax on profits derived from intellectual property held by foreign companies — a move designed to compel those companies to move back to the United States. Puerto Rico is considered part of the United States in all realms except taxes — meaning that island residents don’t pay federal income taxes but do pay into Social Security. Companies based on the island are treated as if they were located in other Caribbean tax havens not under an American flag.

One potential loser in the new GOP tax bill: Puerto Rico

The storm-ravaged island’s governor warns a new tax on foreign entities could affect its critical manufacturing sector.


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