FORBES: Thanks To Gov. McCrory, North Carolina Pays Off $2.75 Billion Debt, Saving Taxpayers $280 Million by Travis H Brown on May 11, 2015

Accepting large sums of money from the federal government often carries negative consequences. In 2009, North Carolina began borrowing federal money in order to extend unemployment insurance benefits. The amount owed by the Tar Heel State piled higher and higher – until North Carolina Governor Pat McCrory decided to take some proactive, bold steps regarding both debt and taxation. Now, those steps are yielding impressive and encouraging results. This week Governor McCrory announced that his state’s $2.75 billion debt to the national government has been paid off (and, notably, $2.5 billion of that daunting sum was paid off during McCrory’s time as governor).

McCrory made the strategic decision to cut weekly unemployment payments and decrease the amount of time a jobless worker could receive these payments. Maximum weekly compensation dropped to $350 from $535, and the allowable timeframe for collecting payments went from six months to fifteen weeks. This decision disqualified North Carolina from a federal compensation program for the long-term unemployed – a move that proved crucial to spurring employment. No longer compensated to stay out of the job market, unemployed North Carolinians sought work, and the state’s unemployment rate (nearly the worst in the U.S. when Governor McCrory took office in 2013) fell lower than the national average.

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Senate President Pro-Tem Phil Berger (R-Rockingham) underscored the importance of this accomplishment, noting that each year the state didn’t pay off the debt, North Carolina businesses would suffer the ramifications of incrementally higher taxes. Berger explained that “the debt to the federal government was a tax on jobs, pure and simple.”

By paying off this nearly $3 billion debt four years earlier than required, the McCrory administration is helping business owners save a serious amount of money. (For every year the federal debt remained unpaid, business were seeing unemployment insurance taxes rise by $21 per employee.) The thousands of dollars being spent to pay down the debt, McCrory noted, “could have been invested in new jobs or raises for productive employees.”

With the debt paid off, North Carolina businesses will save $280 million in penalties this year alone. Rather than being thrown at an ineffective government program, those dollars can be invested in new jobs, new equipment, and new opportunities. North Carolina Secretary of Commerce John E. Skvarla, III, said this week that the early repayment makes North Carolina “more attractive to employers who want to move here and create jobs.” McCrory’s strategy provides more than early exit from the heavy burden of debt – it provides businesses the opportunity to thrive in North Carolina.

2015: Year of State Income Tax Cuts?

Current reports such as this one by the American Legislator point us to one key state trend:  recently elected state leaders are trying to lower the price that we place on work. We know, from our best-selling book, Wealth of States, that when you lower the price of work, you can expect to see more of it. Low tax states not only see more growth in their state economy and their personal incomes, but also grow an average of 30% more state and local government revenue over a decade!

This year, 31 of our 50 states are governed by conservative executives. Voters elected Governor Larry Hogan in Maryland who made the flight of taxpayers a centerpiece campaign theme last November. Florida Governor Rick Scott cut over 20 different kinds of taxes, and continues to lower the fiscal drag even further with new tax relief measures on communications services.

2015 could prove to be the year of the state income tax cut.  For more information about why this matters to states, check out my James Madison Institute presentation given in Tallahassee, FL.

Time to Tell the Truth on Taxes

As a co-author that helped compile literally fifty years of evidence among and between state economic performance, articles like this New York Time’s piece entitled “Republican Governors Buck Party Line on Raising Taxes” remind me how important it is to have sound economic proofs available to those who need it.  Too often, major media sources are quick to brush off any look at the peer review literature that clearly points in one solid direction:  lots and lots of evidence that proves that lower marginal tax rates on income yields stronger economic growth.  More simply, when you lower the price of work, you see more of it.  As co-author Art Laffer likes to say, “this isn’t rocket surgery.”

As one of last year’s New York Times Bestsellers in April 2014, our book, An Inquiry into the Nature and Causes of the Wealth of States, should be an easy reference off which to find an alternative point of view than that of Michael Leachman in this January 24, 2015 article.  A full list of peer review studies can be found within our book, along with an entire chapter entitled “Au Contraire, Mon Frere,” that looks at most opposing views.  Within Chapter Three, we address the effects of energy, personal income taxation, and overall tax burden in a very comprehensive way.

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The real spoiler here within the long-term data is not merely that states with lower income tax rates grow faster, but that those states with an overall lower tax burden grow their state and local tax revenue faster than those with higher burdens.

When one looks back from 2002 to 2012, an equal weighted average of the nine highest tax burden states (ME, MA, MN, RI, WI, CA, CT, NJ, and NY) shows a growth in state and local tax revenue of 48.9% over the decade.  By contrast, an equal weighted average of the nine lowest tax burden states (AK, SD, TN, LA, WY, TX, NH, AL, and NV) shows a growth in state and local tax revenue of 80.9% from 2002 to 2012.   So, why on earth would so many liberal-leaning advocacy groups ignore this evidence?  Perhaps it doesn’t fit their faith with big government, even if it has been ineffective time after time.  Features like that of Adam Nagourney and Shaila Dewan should more accurately look at what Governors are really trying to do today:  lower their overall tax burdens away from taxing work, and towards less distortionary ways to collect revenue.  If that was done more objectively, one would see that Governor Synder of Michigan has been attempting to lower the overall burden that Michiganers must absorb.  Governors like Sam Brownback (KS) and John Kasich (OH) are trying to upgrade their tax codes to be in line with the true nature of their workforce, while lowering their overall tax burden.

By looking at the long run evidence, having a low tax burden within our state is good for how we provide for our public services.  There’s even more incredible results to observe by comparing the nine lowest tax burden states compared against the nine highest tax burden states.  The nine lowest tax burden states have more full-time equivalent education employees per 10,000 of population than do the nine highest tax burden states.  The nine lowest tax burden states are increasing the number of full-time equivalent education employees far faster than are the nine highest tax burden states.  The nine lowest tax burden states pay the education employees a lot less per full-time equivalent employee than do the nine highest tax burden states – think public-sector teacher unions.

Fellow co-author Stephen Moore covers the real trend of federalism in today’ s Wall Street Journal piece, “The Tax-Cutting Boon Sweeping the States.”  American workers are finally getting tax relief from their states.  Such assistance would be even more stimulating if Washington wasn’t attempting to hike federal tax rates during the same moment.

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Pence’s Playbook Nets Over 100,000 Jobs In Indiana

There are some true leaders in the Heartland Tax Revolution, and their leadership creates high-impact results. Case in point: Indiana. Governor Mike Pence’s commitment to boosting his state’s economy is already paying dividends. A firm supporter of tax reform, Governor Pence signed into law a package of tax cuts that gave Indiana one of the nation’s lowest corporate tax rates. The law goes into effect in the latter half of 2015, and by the time the cut is fully phased in (in 2021), Indiana will boast the second-lowest corporate tax in the nation.

Encouraging figures show that Pence’s approach is already working. In 2013, Indiana netted 50,000 new jobs. This year, only midway through summer, nearly 54,000 new jobs have been created. In June alone, Indiana saw an increase of 10,000 private-sector jobs. What’s more, Indiana already ranks among the top ten states with the best statebusiness tax climate, according to the nonpartisan Tax Foundation’s 2014 report. (The individual income tax burden is tenth-lowest in the nation, and Pence would like to reduce it even further.)

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(Photo credit: Wikipedia)

When states offer a healthy business climate, companies take notice. Home-improvement giant Lowe’s is opening its new customer support center in Indianapolisand creating 1,000 jobs. In a recent interview with the Indianapolis Star, Governor Pence said, “I don’t think you can overstate the importance of 1,000 good-paying jobs coming to Central Indiana.” The opening of the support center shows Lowe’s continued enthusiasm for the tax climate and work ethic of Indiana; the company already employs 7,900 people at 44 stores.

Lowe’s isn’t the only source of good news in the Hoosier State these days. GE Aviationselected Indiana for its $100 million jet-engine-assembly factory. By 2020, the factory will have created 200 new jobs with strong ties to Purdue University. The new 225,000-square-foot facility in Lafayette will produce commercial aviation’s top-selling engine, and the GE/Purdue partnership will be a boon to talent recruitment, research, and innovation. This collaboration is key, as it’s reflective of the reform-minded governor’s approach not just to taxes, but also to equipping students with skills needed in the 21st-century workforce.

Pair this innovation and job creation with the phased-in corporate tax cuts, and you’ll see that Governor Pence is ensuring a bright future that will stretch far beyond his personal tenure. (Plus, thanks to a relatively low personal income tax, those GE and Lowe’s employees can keep more of what they earn, and save or invest it in the way they choose.)

Job numbers are impressive, but equally important is the data upon which economic decisions should be made. An analysis of IRS taxpayer data shows that Governor Pence’s tax reforms are absolutely essential in order to remain competitive. When Hoosiers leave the state, the top new destinations for their families (and their adjusted gross incomes) are Florida, Arizona, Texas and Tennessee. What do those states have in common? Zero personal income tax. And, just as telling, when Indiana gains new residents and new working wealth, both come predominantly from high-income-tax states (between 1992 and 2011, Indiana gained a whopping $2.12 billion from its tax-happy neighbor Illinois). Friendly tax structures entice small businesses, which helps explain why the 2013 Small Business and Entrepreneurship Council’s 18th Annual Small Business Policy Index ranks Indiana as the 8th-best state for a small business. (You’ll find Illinois down in 35th place.)

Thanks to Governor Pence’s leadership and the implementation of a business-friendly tax structure, Indiana is experiencing a resurgence in manufacturing that is critical to a healthy economy. It’s only fitting that Governor Pence partner with this very media company in hosting “Forbes Reinventing America: The Innovation Summit” this fall in Indianapolis. On November 13, Indy will become the epicenter of the American innovation discussion, as hundreds of the nation’s top entrepreneurs – in fields from aerospace to medicine to agriculture to finance – gather to talk about the way they do and how forward-thinking companies can change the world.

Pence’s commitment to a healthy economy is clearly making national waves, while simultaneously ensuring a quality way of life for working Indiana families. What’s more, he’s keeping jobs in the Heartland that might otherwise go overseas. Other Midwestern states – such as Illinois, with its burdensome taxes and stagnant growth – would do well to take a page from Pence’s playbook.

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Wealth of States makes New York Times, USA Today and Denver Post best-seller lists

Travis H. Brown’s new book An Inquiry Into The Nature and Causes of the Wealth of States, coauthored with Arthur B. Laffer, Stephen Moore, and Rex A. Sinquefield, has made the New York Times list of best-selling hardcover non-fiction books for the week of May 4, 2014.

Taking a detailed and critical look at income taxation across the nation and applying quantitative analysis, the book explains why eliminating or lowering tax burdens at the state level leads to economic growth and wealth creation.

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Published by John Wiley and Sons, An Inquiry Into The Nature and Causes of the Wealth of States entered the Times’ best-seller list at number 19. The Kindle version of the book also is currently the number two seller in the Times list’s Public Finance section and number nine in the Taxation section, while the hardback edition is ranked number six in Public Finance and number 15 in Taxation.

In related news, the book also is ranked number eight on the Denver Post’s list of non-fiction best sellers in Denver for the week of April 27 and #79 on USA Todays Best Selling Books list. 

An Inquiry Into The Nature and Causes of the Wealth of States is on sale now online and at bookstores in both e-book and hardcover formats for $29.95.

What they’re saying about An Inquiry Into The Nature and Causes of the Wealth of States

 George Shultz: “This is a book full of evidence, compelling in the way it reveals differences among states and clear consequences.  Read, learn, and weep in some constituencies or give three cheers in others.”

Steve Forbes: “Wow!  This compelling, comprehensive book will be the bible for state and local leaders who truly want rapid economic growth.  It will profoundly, positively change politics and economics in America.”

Phil Gramm: “Arthur Laffer is justly known as the father of Supply Side Economics whose pro-growth tax cuts combined with Reagan’s policies of limited government, free enterprise and strong defense ushered in a twenty five year economic renaissance.  He is not as well known for his work on the States, but this book will change that.  With Stephen Moore, Rex Sinquefield and Travis Brown, Laffer uses the marvelous laboratory of the fifty States—set in the environment of free trade, population mobility and a common underlying federal structure—to demonstrate conclusively that economic policy matters.  Where taxes are low, private property rights are strong and free enterprise prevails, prosperity grows.  High taxes, big government and special interest domination may work politically to win elections, but they fail to bring home the bacon. Prosperity is not an accident or a fate, it is a choice—a freedom choice.”

Dick Cheney: “Left wing, right wing, liberal, conservative, Democrat or Republican, Arthur Laffer’s book, The Wealth of States has the facts and the framework for policymakers and citizens alike. Tapping decades of research and experience in state economics, Laffer, Moore, Sinquefield and Brown communicate clearly the guiding principles to elevate their states—and thus the nation as a whole—to levels of prosperity never before seen.  State and local legislators should base their economic policies on this book—it’s a game changer.”

Jack Welch: “Arthur Laffer’s latest book on the states makes it clear that running a state is a lot like running a business.  The goals are the same:  making our businesses and states more prosperous, competitive, and attractive to investors and citizens.  With important lessons identified, The Wealth of States will make its mark.”

How the Sunset Falls on the New Hertz

Travis H. Brown in Naples, FL

Travis H. Brown in Naples, FL

Recently, I have blogged several Forbes and Fox and Friends appearances regarding the personal benefits for taxpayers moving to Southwest Florida.

We have addressed numerous audiences using our How Money Walks web applications to mark down where other Americans have moved over the last nearly 20 years.

On the month of this picture above, winter temperatures in Minnesota were worse than ten below zero, barely above 20 in Missouri, but up to 86 degrees with sun in Collier and Lee Counties in Florida. Continue reading

Sirius Transparency: National Radio Tours on How Taxpayers Vote with Their Feet

By Travis H. Brown

It is the ultimate jobs prize for all competitive governors:  private sector investment.  America’s job creators tend to move where their work is most welcome.  Nothing is more welcome than not having a personal income tax applied to their workers, owners, and shareholders. The more you work, the more you stand to earn, expand, and re-invest.

During the past few months, our book tour team has had the privilege of sharing many American stories, thanks to the Internal Revenue Service data file and the United States Census Bureau.  Our experience shows precisely how more than 40 million Americans have moved locations in efforts to move up the economic ladder.

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This week, we joined the Wilkow Report at the nexus of national radio: Sirius XM headquarters in New York City.  On one floor, Sirius is like a musical carnival.  There is one studio after another, Shade45 hip hop right down the hallway from Patriot channel.  The only thing more exciting than the 36-floor elevator ride (where you are certain to ride up with some worldly musicians) is the inner sanctum of broadcasting suites and audio rooms.

TravisWilkowSirius_2Radio reminds authors like me that our message is personal and local. Each week, we have spoken by radio to taxpayers who place faces and names behind our self-evident messages.  Within this studio, I recall the late-night truck driver moving through Montana, calling in to talk taxes. When I returned to this studio, I overheard just how incensed some taxpayers are to learn about how their money is spent in Washington, DC.

Every form of media outreach has its advantages and drawbacks. For the two-thirds of the world who are visual learners, nothing beats Internet television or studio television.  However, with most TV programs, time is often in short supply.

While our smartphone applications, web maps, and touchscreen television technologies are not accessible to a radio audience, radio like Sirius XM does offer some advantages.  First, radio across America can allow us to find many busy or passive audiences.  Second, oftentimes, joining a syndicated producer like the Wilkow Report on radio allows us to drill down on more examples.  For example, on this week’s program, we were able to detail how Californians choose Las Vegas over Phoenix when they pack their bags.  When a radio producer wants to talk about a home state, we can have a true dialogue rather than merely rapid-fire questions.

TravisWilkowSirius_1My experience with radio programs is that they are most interesting when they include multiple conversations.  Another late night show that I recently enjoyed was in Minneapolis.  When you can banter back and forth much like we talk amongst our closest friends, something special happens. Each of us feels more connected, more human, and even more relevant.

Our fast-paced world can sometimes make everything feel a bit too shallow.  A celebrity once pointed out that her regular appearances on a reality show helped reveal her full and true personality.  Authors and advocates who make the extra effort to visit America’s great radio outlets can do the same – siriusly.

US News: Every Day Is Tax Day

There is no such thing as a mere “tax day,” or even a “tax season”

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Travis H. Brown is the author of How Money Walks: How $2 Trillion Moved Between the States, and Why It Matters.

With April 15 comes the familiar litany of mundane exercises. Fill out the forms. Call the tax preparer, or pull up the software. Figure out the best way to reduce your tax burden. Pop everything in the mail. For many Americans, mid-April is the only time to think about taxes. However, taxes should play an integral role in life’s biggest decisions, from where to start a business to where to retire. Taxes are a concern of local, national and global proportions. Where we live determines how much income we are able to keep, save and invest. From personal bank accounts to massive corporate holdings, capital migrates to where it is treated best.

In the United States, no- and low-income tax states are experiencing booms, while high-income tax states are threatened with busts. This is no mere hypothesis. Fifteen years’ worth of data from the Internal Revenue Service shows that net adjusted gross incomes (net AGI) move from states that levy high income taxes to those with low or no income tax. Our analysis of more than 134 million individual taxpayer records revealed that, between 1995 and 2010, more than $2 trillion dollars moved between the states. Using this unimpeachable data, we can see – down to the county level – which areas are gaining wealth and residents, and which are losing them.

Why does this matter? There are myriad reasons. Successful people and businesses flee from states with harsh tax environments. They flock to states with benign, progrowth tax structures that allow them to save and invest. This is why a state like California, with its top income tax rate of 13.3 percent, saw a loss of more than $31.7 billion over 15 years. Texas, which taxes its residents at the very agreeable rate of zero, gained more than $22 billion over that same time period. (Recently, Texas Gov. Rick Perry took advantage of this reality by running ad campaigns that woo California businesses to move to Texas.)

Of course, taxes are not the only factor considered before a relocation – but they can (and should) play a major role in the decision. High-profile, real-life case studies have amplified the conversation, such as when golf legend Phil Mickelson said high taxes made him want to leave California. But the issue of economic mobility is certainly not restricted to the wealthy; moving from a high-tax state to a low-tax one makes a significant impact (equivalent to an immediate and permanent pay raise) for middle-class families, too.

All across the nation, leaders are taking notice of tax migration. No one wants to be the next California ($22 billion lost), New York ($58.6 billion lost) or Illinois ($26.1 billion lost), with wealth and talent streaming out of the state. Governors like Louisiana’s Bobby Jindal have proposed all-out repeals of the personal income tax, in order to keep more money in residents’ pockets, to boost consumer spending, and to compete with business-friendly neighbors. This year alone, the governors of Indiana, Wisconsin, Ohio, North Carolina, Idaho, New Mexico, Kansas and Maine are all backing serious tax reform. In other states, such as my home of Missouri, state legislatures are proposing tax reform bills and carrying the torch for real change.

Clearly, a number of people – from celebrities to legislators to working families – are grasping the difference that a low-tax environment can make, both in their lives and for the future of their communities. This April 15, it’s time for this message to reach even more Americans. There is no such thing as a mere “tax day,” or even a “tax season.” Our lives and livelihoods are impacted by taxes every day. The decisions we make, based on this knowledge, can change our economy for the better.

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Forbes: When States Make Empty Promises, Taxpayers Walk

As American taxpayers wrap up their individual tax filings, the vast majority of our state legislatures still have a few weeks or months to complete their efforts for state tax reform. In the coming days, small business owners will try hard to forget how much they paid into the system in 2012. Given the pain associated with paying, measured against the return, one can easily see why business owners move to more tax-advantaged locations — just as several professional athletes and entertainers have done recently.

However, if our job creators are to turn around America’s economy, they cannot turn a blind eye to leading reforms happening within their own state capitols. Watching Washington, D.C., languish its way through more than 73,000 pages of Internal Revenue Service regulations could easily consume years. However, the chief executives of our states, the 50 governors, often navigate substantial tax code changes within weeks or months. If turning around Washington, D.C. can be likened to shifting the direction of a battleship, realizing change within the states is more akin to a few folks padding rapids inside a canoe.

The trend towards state action, in part as a hedge against rising uncertainties with federal taxes, may be on pace to break a state legislative record. Kansas Governor Sam Brownback led with tax cuts this past January. State legislatures in Oklahoma, Missouri, Iowa, Indiana, Ohio, Louisiana, and North Carolina have responded with tax cut bills of their own. What do these states have in common on other issues beyond income tax reform? Their commitment to take responsibility for reigning in major increases in state spending is clear. States serious about economic growth are putting new ideas on the table.

Based on the headlines, and even well-meaning critiques, the strength of this trend is not always apparent. Governors who lead with bold tax-cutting principles are fought by many stakeholders. Those who choose to oppose new, independent tax codes often write political obituaries before bills are even considered. Owners of small businesses know that success starts with courage and conviction. If the process for tax reform were an easy one, every governor, speaker, and senator would be leading the charge.

Governors do not have to guess about the past performance of how their business climate has lured new income. Thanks to migration data, we see the clear evidence that when states make empty promises, taxpayers leave. That means that auditing Milwaukee’s leadership versus the loss of more $22 billion in adjusted gross income within Chicago will be easier to do. That’s one audit worth having in our economic future.

Source: Forbes.com

Forbes: Why All Governors Need A ‘Empleos Ahora’ (Jobs Now) Tax Haven Strategy Like Puerto Rico


 

One could argue that the new face of American leadership can be found in Puerto Rico. Take, for example, newly elected Governor Alejandro Garcἰa Padilla.  He won a narrow election in what could someday be America’s 51st state, on an island with 3.7 million people.  Perhaps most importantly, the new administration seems to be continuing the business- and investment-friendly policies of previous governor Luis Fortuño. Indeed, it appears that on either side of the political spectrum, Puerto Rico is committed to becoming a tax-friendly investment haven. The rest of the continent would do well to take a look.

Following in Fortuño’s footsteps, Padilla seeks to expand an economy roughly the size of Delaware.  As the new governor articulated in his message platform, his plan will “attract industries that cannot operate outside the United States because of security and tax reasons.”

From the mainland, looking out toward the Caribbean, Puerto Rico’s strategic path towards a U.S.-based tax haven makes a lot of sense.  In recent years, it has become harder and harder to repatriate income into the United States, with an estimated $8 trillion settling offshore.  Certain industries, such as those investment funds regulated within U.S. securities law, still might prefer to do business within an American-based jurisdiction.  Then, there’s the issue of real tax advantages, such as simplification and lower effective rates.  Where else within U.S. territorial waters can the U.S. stop the filing of a federal income tax return, other than Puerto Rico?  Recently, the Internal Revenue Service issued this advice in Topic 901; as of January 4th, 2013:

“In general, United States citizens and resident aliens who are bona fide residents of Puerto Rico during the entire tax year, which for most individuals is January 1 to December 31, are only required to file a U.S. federal income tax return if they have income from sources outside of Puerto Rico or if they are employees of the U.S. government.”

How can someone potentially prove that all of his or her income is sourced within Puerto Rico?  Well, a first step is moving yourself and your assets there.  Sources, such as Bloomberg, are now reporting that at least ten wealthy investors have already made the jump.  Then, for some, there is utilizing the new law that was set up to lure businesses into Puerto Rico – known as Act 22, it exempts those who qualify from income tax on their interest, dividends, and certain long-term gains from securities.  There’s no need for a Phil Mickelson apology tour like hedge fund billionaire John Paulson has attempted.  Puerto Rico incentives will matter to those who meet their attractive conditions.

On the international front, legal advisers explaining Act 22 advise foreign investors that as long as they do not own residential holdings within the United States (excluding Puerto Rico), they may not be subject to U.S. estate taxes.  This tax code structure could provide Puerto Rico with the best of both worlds on how money walks onto the island – foreign assets if you want it offshore, and domestic governance if you need it onshore.

Since states like Florida (without a personal income tax) have attracted $86 billion in adjusted gross income due in part to tax factors (1995-2010), Puerto Rico’s competitive climate could show other states how tax code incentives work with financial services.  Governors like Louisiana’s Bobby Jindal are pressing to repeal state personal income taxes altogether for the same goal:  Más dinero para tu bolsillo (more money in your pocket).  Within the next decade, if these state initiatives do not pass… Puerto Rico could have more money in its tax-haven pocket as a result.

Travis H. Brown is a contributor to Forbes.com: Source Link