H. R. 16 - - - - - 16, 1950
MR. R RiCO, 50 a~ost Teati ny by Hon. Walter A. Lynch
befor Pu lie Lands Committee, on
I am happy to be here this morning and to have an opportunity
to speak before this Committee on behalf of H. 7674 which would
permit the People of Puerto Rico, at long last, to participate more
fully in the heritage which we call democracy.
During the more than years that Puerto Rico has been
under the American Flag, we have acted, although slowly, in liVing
up to our Treaty obligations to decide the political status of
Puerto Rico. Indeed, for many years, after the initial steps,
Congress did nothing at all.
In 1900, Congress created a temporary civil government
for the Island under a measure known as the Foraker Act. In 1917,
a permanent Civil Government was accorded by the Jones Act which
retained most of the provisions of the original Foraker Act and
added some' others. Since then, there have been a number of changes
to the Organic Act, mostly minor until the last few years, when
Congress has seen fit to give Puerto Rico some really significant
grar•. s of greater self-government, such as the right to elect their
own Governor and name most of their own public officials.
r:../. -# II
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Now, for the first time, this committee is charged with the
responsibility of considering a bill,which would grant to the People
of Puerto Rico, the authority to organize a constitutional government
of their own choosing within certain well-defined boundaries and
limitations specified by Cc.ngress.
To my mind, this is the wisest step which Congress could
take, not only from the point of view of doing what we should before
have done to fulfill our obligations for Puerto Rico, but also to
demonstrate to the democratic world, as well as to that part of the
world which does not yet follow the democratic way of life, that
the United States really believes in democr,acy,
I am sure that all those present here today, can see that
such a practical demonstration of the principles of democracy will
strengthen and elevate our position before the United Nations. For
this country is signatory to the United Nt·tions charter calling for
united efforts towards obtaining self-government for dependent people
as rapidly as they are able to assume the responsibility of self-government.
That Puerto Rico is ready is demonstrated by the
record of the present administration under the able leadership of
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Governor Munoz-Marin, the first elected Governor of Puerto Rico.
Last November, I was a member of a sub-committee of the
House Ways and Means Committee which went to Puerto Rico to look
into the advisability of extending Social Security to that Island
and to the Virgin Islands. We held hearings down there and we went
out and studied the living conditions of the people. We saw what the
Insular Government is trying to do by way of industrialization and
better agricultural practices and by modern social legislation to
better those living conditions.
The Insular Government is doing ita level best to act as
rapidly as possible in removing people from the slum areas. and in
creating jobs, bUilding new industries~ raising wages, eradicating
slums, building public housing projects, and much more. What they
call their self-effort; their "Operation Bootstrap", is a magnificent
thin6 to see in action.
It has been said, "They are moving mountains in Puerto
Rico" . They really are. They are movins mountains of obstacles
and with unbelievable dispatch. Progress is showing through everywhere.
Our Subcommittee went to Puerto Rico under the chairmanship
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of Representative Sidney Camp. Upon our return, we recommended
unanimously, as the result of our investigation, that Social
Security be extended to Puerto Rico on the same basis as in the
Before we could make such a recommendation, we had to look
carefully into the tax system in effect in Puerto Rico. We learned
that prior to the ceding of Puerto Rico to the United States, Spaan
had granted a considerable dGgree of self-government to Puerto Rico
und~a charter of autonomy. With this charter of autonomy, Spain
granted, also a great measure of self-determination in the matter
of taxes in Puerto Rico. Consequently, Puerto Rico had its own
tax sJstem which was continued by the Foraker Act in 1900 and by
the Jones Act in 1917. This practice of giving Puerto Rico self-determination,
tax-wise, has been a consistent, and in my opinion,
a wise policy of the United States. Indeed, any deviation from
that policS would constitute a precedent, insofar as Puerto Rico
The Subcommittee of the House Ways and Means Committee
found that the primary source of revenue in Puerto Rico is made
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up of excise taxes collected on a large variety of articles. These
taxes yielded 40.1 million dollars in revenue in the fiscal year
1948-49. Income taxes on individuals and corporations rank second
as an important source of revenue in Puerto Rico. During the same
fiscal year, 26.4 million dollars was collected from such source.
Taxes on real and personal property ranked third and yielded
3.3 million dollars to the Insular Government in fiscal year, 1948-49.
In addition, the local municipal governments collected 1 million dollars
in p~'operty taxes.
9.6 million dollars were covered into the Insular Treasury
from customs, duties, and taxes imposed on products shipped to the
Mainland to balance federal taxes paid on those products when pro-duced
on the continent. Rum and tobacco made up 1.4 million dollars
of this amount.
Puerto Rico, for 14 years, has had a State Insurance Fund
to protect the workers against accidents suffered in the course
of their work. 3.9 million dollars in premiums were assessed on
pay-rolls amounting to 221.0 million dollars in 1941-48.
An unemployment insurance law protecting sugar-cane workers
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against seasonal unemployment went into effect last year. The
sugarcane industry and the Insular Treasury worked together in evolving
the necessary payroll and tax return forms. Between January 1 and
October 31, 1949, the pajroll tax collections totaled 1.8 million
dollars. 5,414 employers reported during that period and more
than 22,000 returns were processed.
The report of the subcommittee has this to say about the tax
system, "We call attention to these various tax programs in order to
suoctantiate our position that existing Insular tax programs have
already laid a foundation for the collection of the federal employ-ment
taxes. In our opinion, the collection of these taxes will
present no insurmountable administrative difficulties, and the
experience of the insular treasury, together with familiarity with
similar taxes by both employers and employees, will be of great
H. R. 7674 does not alter the present tax relationships
between Puerto Rico and United States. The Congress should insure
to Puerto Rican citizens that they will not be placed in a
discriminator~ position or given a submerged status tax-wise. I
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believe it is significant to point out that in 1946, there were only
4,000 persons in all of Puerto Rico with taxable incomes exceeding
$2,000 per year. In this connection, I should like to emphasize thet
Puerto Rico has a population in excess of 2 million. The average
income is less than half the average income of the lowest income
The internal revenue laws of United States do not extend
to Puerto Rico, and if they did extend, these facts make it lucidly
clear that, when all is subtracted and divided and finally totaled,
United States could not hope to realize much revenue from levJing
federal income taxes in the Island.
Also, it must be remembered that Puerto Rico bears a sub-stantial
local tax load which, combined with the collec7.ion of
excise taxes in the Island, constitutesa sizable tax burden.
Consiaering that there is no provision in the Puerto Rican
income tax structure for the splitting of incomes of husband and
Wife, it is seen that Puerto Ricans have a substantial tax burden
which, in its entirety, is not sUbstantially different from that
of mainlanders. I might say, in closing, that the Treasury
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Department of Puerto Rico has undertaken an all-inclusive review of the
insular tax system, including its implications on the econoMJT and the
determination of who, in the final analysis, pays the taxes in Puerto
Rico and who ultimately benefits from public expenditures.
In a statement before the Ways and Means Committee in connect1 .L
with the extension of social security to Puerto Rico and the Virgin
Islands, Sol Descartes, Treasurer of Puerto Rico, on November 17 of
last year: said "We are striVing to find the middle course which
would encompass the highest possible tax contributions of the
local economy compatible with the extension of economic incentives
to expand production, and the investment of local savings in local
"As Governor Munoz-Marin pointed out •....... This is an
extremely difficult problem. It has not been solved in the most
advanced, industrialized nations".
During the past few years, Puerto Rico has accomplished
considerable simplification of its excise taxes. Additional
measures have been formulated towards that end and are ready for trial
So we see, gentlemen, that in a field of self-government
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in which Congress, long ago, granted Puerto Rico a free hand and full
reign, they have done an effective job. I feel sure, and in this
opinion I have many colleagues, that Puerto Rico will strive, Just
as industriously, and equallJ as effectively, in the other field of
self-government, as they are extended to them.
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