Tax-Dodging Tech Nomads Are Puerto Rico’s Migrant Crisis

Andrew J. Padilla
·9 min read
Ricardo Arduengo/AFP/Getty
Ricardo Arduengo/AFP/Getty

When I asked Chuck Schumer last week about the tax haven Puerto Rico had become for wealthy settlers and their growing political power, he responded more forcefully than I’d expected.

“We oughta tell that governor none of this bullshit that you let millionaires and billionaires escape taxes, and I’ve told him that,” the Senate majority leader said.

That sounded familiar: an old white man telling Puerto Rico—in this case, Gov. Pedro Pierluisi—what to do. But, in contrast to Donald Trump, Schumer was attacking the pro-U.S. statehood party (PNP) for being too generous to the wealthy. In doing so, Schumer highlighted a reality about the forces pushing for U.S. statehood in Puerto Rico that most progressives are unaware of.

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Democrats are looking to U.S. statehood for territories (a.k.a. colonies) as one way to fix the structural inequalities built into the U.S. Senate, Electoral College system, and the country generally. But few progressives have attempted to more fully understand the devastation imposed by occupation before assigning their prescribed solution to it. Democrats need to grasp that Puerto Rico is more than a hope for blue votes; it is an occupied nation with a right to determine its own future, not cannon fodder in a fight for control of the U.S. empire.

Puerto Rico has lost over half a million residents over the last decade. With around three million residents today, the U.N. expects Puerto Rico's population to plummet to 1.2 million by 2099. Residents are fleeing paradise because deadly austerity is being imposed by a U.S.-appointed fiscal control board that has closed hundreds of hospitals and schools, and forced privatization of its public resources. As the debt collectors leave Puerto Ricans with no choice but to pack up and go, the U.S. and Puerto Rican governments have collaborated to attract wealthy settlers to the colony.

In 2011, five years into an economic recession and faced with funding cuts from the federal government, then-Gov. Luis Fortuño provided his answer to the crisis: 100 rich friends of his who wanted to invest in the island. To clear their path, Fortuño had the legislature approve a little law known as Act 22, which lures U.S. residents to Puerto Rico with the promise of zero personal capital gains tax in exchange for island residency. Act 22, combined with Act 20—which charges corporations just 4 percent in capital gains tax for export services—are just some of the benefits that have enticed a wave of wealthy U.S. tax-dodgers to PR.

At the time, very few people spoke against these acts. But one of the loudest voices against them came from Fortuño’s own PNP—pro-U.S. statehood—party. Former Gov. Carlos Romero Barceló, grandfather of the statehood movement—long accused of covering up a massacre of independence supporters—hated the Act 20 and 22 tax breaks, calling them an “insult” to the island. As Barceló explained, “Puerto Rico has ceased to be only a colony of the United States and has converted itself into a colony of corporations and multimillionaires.”

In 2013, Alejandro García Padilla beat Fortuño, taking the governor’s mansion. García Padilla of the pro-commonwealth party PPD voted against Act 22 as a legislator, but once governor, his protests ended. With U.S.-imposed austerity pressing upon the territory, like Fortuño, García Padilla went to find revenue elsewhere. García Padilla and his secretary of economic development Alberto Bacó toured the U.S., showing Wall Street investors the lavish lives they could lead, the property they could scoop up, the helicopter pads by the beach they could have—if only they moved to Puerto Rico for tax breaks. They got an enthusiastic response: Even as Wall Street investors took advantage of Puerto Rico’s tax breaks, they also profited off of the island’s debt.

When pro-U.S. statehood Gov. Ricardo Rosselló took power in 2017, he tried even harder to attract wealthy “digital nomads” to relocate to and purchase property in Puerto Rico. In 2019, a leaked chat became the final spark turning longstanding discontent over corruption and slow recovery post-Hurricane Maria into historic protests. But even as approximately 1 million Puerto Ricans demanded that Rosselló resign, his allies in government attempted to rezone the entire island to make real estate deals profitable for wealthy migrants and corporations. One of Rosselló’s last official acts before he was deposed was to solidify Act 20 and 22 and bring them into a broader incentives bill known as Act 60.

Current pro-U.S. statehood Gov. Pierluisi, elected with just 33 percent of the vote in 2020, is continuing on the same path.

Despite the pandemic and economic crisis, the luxury housing market in Puerto Rico is skyrocketing. Neighborhoods like Old San Juan, where Puerto Ricans used to enjoy the charm of living in one of the most historic cities on the planet, have become tourist traps where many homes are turned into short-term Airbnb-type rentals. And wealthy migrants are now buying property in municipalities far beyond the capitol.

There is an acceptance among many settlers I have spoken with that gentrification is happening in Puerto Rico—and that they are part of it. Many of them are actively attempting to shield their capital gains in real estate projects. But U.S. residents are hesitant to call this process what it is: settler colonialism. As one investor told me, “This is gentrification, but it’s not colonization. Colonization is bloody.”

But colonization was about land titling, acquisition, and a broader reorganization of local bureaucratic processes to better address settlers’ needs as much as it was about bloodshed. Today, the settlers are rich migrants from the 50 states.

Act 22ers are very active in demanding what they want from the local government. As earthquakes and the pandemic gripped Puerto Rico in 2020, two separate groups of these settlers filed lawsuits to stop the local government from raising the meager contribution they are required to make in exchange for their generous tax savings. They not only fear an increase in the fee they pay for their tax breaks—Act 22ers fear that negative attention to Puerto Rico’s tax haven laws could make it less appealing for future settlers.

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Act 22ers have dedicated large portions of their time to encourage others to join them. Just put “Act 22” into YouTube and jump down the rabbithole. While the Act 20/22 Society is the most established organization representing the interests of wealthy settlers on the island, they prefer a muted tone compared with newer arrivals like bitcoin billionaire Brock Pierce. In a Nov. 30 speech in Dorado, Puerto Rico, Pierce not only cast doubt over the winner of the U.S. elections, but reiterated his interest in using technology to reshape Puerto Rico’s electoral system. He recently purchased a monastery in the heart of Old San Juan, one block away from the governor’s mansion, at the very corner where the protests that took down Gov. Rossello in 2019 took place.

Not only are Act 22 recipients buying tons of property, they now vote in Puerto Rico’s elections. New residents to Puerto Rico have even taken to YouTube to explain what their first time voting in PR was like. Recent numbers are hard to find, but as of November 2019, over 4,000 Act 20 and 22 decrees had been issued. These numbers do not include grantees who moved before being granted the tax breaks, nor does that figure include family members and the friends grantees have convinced to move down with them.

This migration is statistically meaningful when you consider how close the 2020 plebiscite in favor of statehood was. The last election for governor was decided by around 17,000 votes, the still contested mayor’s race in San Juan was decided by just a few thousand votes, and the mayor's race in Guánica by less than 100 votes.

Local anxiety over the political space taken up by wealthy U.S. settlers in Puerto Rico is growing. For pushing local legislators to support his real estate interests, and promoting U.S. statehood for Puerto Rico, Pierce and his collaborators have faced fierce protests in Puerto Rico and the U.S. Resistance to wealthy settlers has taken many forms. After YouTube influencer Logan Paul announced a move to Puerto Rico, artist Kristian Bob made a song explaining the colonialism of it all.

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Independence party (PIP) Sen. María de Lourdes Santiago has proposed legislation to claw back Acts 20 and 22. But despite increasing discontent, Santiago will have to convince politicians like Gov. Pierluisi who have taken donations from these very settlers. In fact, the top three recipients of political donations from wealthy settlers to Puerto Rico in 2019-20 were the current leaders of the U.S. statehood party (PNP). The party with the second most donations from wealthy settlers was PPD, the Pro-Commonwealth party.

More progressive parties like the pro-independence party (PIP) and (MVC), a party that accepts members of all status options and runs on a “good government” platform, have not yet seen much interest from wealthy migrants seeking to maintain their tax breaks.

Some Puerto Ricans welcome these settlers. Wealthy investors getting generous tax breaks and zoning changes don’t often make the headlines like a mugging, murder, or racist Facebook post. Encouraging wealthy investors often means jobs, or more accurately, the promise of jobs. In desperate times, where the money comes from isn’t as important as the promise that money may come at all. But despite the promises for the poor, we know trickle-down economics benefits the wealthy: A 2021 study by Dr. Alexis R. Santos-Lozada found the Act 20 and 22 programs have “had a null effect on the three sectors where this policy sought to increase employment.”

Whether Chuck Schumer and other Democrats are as angered by settler colonialism as tax loopholes the wealthy are using to deprive deeply indebted U.S. states of desperately needed revenue remains to be seen. What is clear is Puerto Rican anger over the land and political power wealthy tax-dodgers are acquiring in their motherland is rising. And the migration of U.S. residents to Puerto Rico has had no bigger cheerleader than the pro-U.S. statehood party PNP.

Sadly, starvation and settler colonialism may be the road to U.S. statehood for this colony. It wouldn’t be the first time.

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