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Life When Government Is Bankrupt

Sunday March 6th, 2016   •   Posted by Craig Eyermann at 11:40am PST   •  

US-bankruptcy-court-puerto-rico-seal How does life change when a government doesn’t have the money to pay the people who loaned it money?

The answer to the question is that life gets a lot harder, as the Associated Press’ Danica Coto reports in “Puerto Rico is cracking down on people who steal power, cheat on their taxes or don’t pay other bills as the U.S. island territory struggles to raise money to make bond payments”:

Amid the crisis, the Treasury Department is going after delinquent taxpayers like never before, even closing a business owned by the head of the Chamber of Commerce for non-payment of sales tax and temporarily shutting down Jose Enrique, a restaurant that had become a renowned culinary destination.

The island’s water utility has prevailed on the Justice Department to file criminal charges against people who have not paid their bills or have stolen service, a step only taken in drastic cases in the past. And a government agency that issues permits recently trumpeted the fact that it imposed a $34,000 fine against a company operating an electronic billboard without its permission….

Delinquent power bills have been piling up for years and are one of the reasons cited by the electrical utility for its financial woes. It recently announced that it will cut subsidized power at public housing units starting next month because of $31 million in outstanding bills.

That sounds a lot like what has been happening in Greece, doesn’t it? But it’s not – Puerto Rico is a territory of the United States. This story is taking place in America.

The people in power are going after money everywhere they think they can get it, and they are going after the working class and the poor because they have already taxed the rich, where they’ve even defined “rich” down to where the territory’s top 33% personal income tax rate applies to all taxable income above $62,750, whether married filing jointly or single. Although Puerto Rico’s residents are exempt from paying U.S. federal income taxes, we should recognize that the same 33% tax rate for single filers wouldn’t kick in until they earned at least $190,150 in income, and for couples filing jointly, the minimum taxable income threshold for a 33% rate is $231,450.

The U.S. territory’s most impoverished residents are upset that the people in power in Puerto Rico are now going after them too:

“It’s not right that they are targeting Puerto Rico’s working class,” Wilma Rivera, a 46-year-old mother of three, said as she watched power company workers inspect her meter for evidence of tampering. “We’re the ones paying for everyone else’s mess.”

Sooner or later, everyone pays when the government is bankrupt.

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March 2016