Critics: Democrats’ Push for Puerto Rico Statehood a Bad Idea

The Condado tourist zone in San Juan after Hurricane Fiona struck the Caribbean nation in San Juan, Puerto Rico, on Sept. 19, 2022. (Jose Jimenez/Getty Images)

The House of Representatives passed the “Puerto Rico Status Act” in mid-December, led by Rep. Raúl Grijalva (D-Ariz.). The mostly symbolic bill could be brought up again in the new Congress. If signed into law, the measure could spark a drastic change to the island’s economy.

The bill would require the U.S. government to conduct a plebiscite for the island’s residents, allowing them to democratically decide whether they would like Puerto Rico to become the 51st state, an independent country, or remain a commonwealth. Previous non-binding referendums have resulted in a slight majority favoring statehood.

Grijalva’s act received unanimous Democratic support in the House, and 16 Republicans crossed the aisle to vote in favor of the bill, including outgoing Rep. Liz Cheney (R-Wyo). Supporters of the bill view it as an important step in undoing the vestiges of American colonialism.

“Invaded by the United States during the 1898 Spanish American War, Puerto Rico has remained in a state of colonial limbo that flies in the face of the anticolonial values upon which the American Republic was founded,” said Rep. Nydia Velázquez (D-N.Y.) in a press release after the bill passed the House. “The time has come to fully decolonize Puerto Rico.”

This argument is not compelling to Yaron Brook, a Puerto Rico resident and chairman of the Ayn Rand Institute. When asked about the congresswoman’s perspective, Brook told The Epoch Times, “I don’t buy it.”

He believes the island’s inhabitants are better off today than they would have been had the United States granted them independence after the Spanish-American war in the late 1890s. People should not focus on whether colonialism is inherently evil, according to Brook, but instead ask themselves, “Are human beings living better lives under this system or not?”

Brook, who is also a hedge fund manager based in Puerto Rico, warned that both statehood and independence could have detrimental effects on the island’s economy.

“Those who want to be a state, basically want to be a state because they want more welfare,” he said, adding that welfare will only make residents more dependent and less productive in the long run. A recent study found that many U.S. states offer unemployment and other benefits that exceed the national median household income.

Brook pointed out that more than 25 percent of Puerto Rican workers are already employed by the government. “There’s a bloat of bureaucracy. Real jobs need to be created here.”

Economist and fellow Puerto Rico resident Peter Schiff, founder of Euro Pacific Asset Management, echoed Brook’s opposition to statehood for the island, emphasizing the added tax burden that would come with it.

“Imagine owning a business in the state of Puerto Rico: 37 percent federal income tax, 15.3 percent self-employment tax, 3.8 percent Obamacare tax, 33 percent state income tax, and an 11.5 percent sales tax,” Schiff wrote on Twitter on Dec. 15. “Plus, since Puerto Rico has more debt per capita than any other state, state taxes will likely be raised.”

Political Climate

Brook, a believer in free markets, does not see the prospects of independence as promising, given the current political climate. Based on the island government’s track record and the rhetoric originating from prominent secessionists, Brook believes independence would move Puerto Rico “in the direction of more statism, more government intervention.”

Proponents of Puerto Rican self-determination, however, argue that there is a moral imperative.

“For far too long, however, the people of Puerto Rico have been excluded from the full promise of American democracy and self-determination,” said Rep. Steny Hoyer (D-Md.), speaking on the House floor in support of the bill. “We owe it to Puerto Ricans to bring an end to their island’s 124-year-old status as a U.S. territory.”

Following in the footsteps of the early 20th-century writer and philosopher Ayn Rand, Brook does not view democracy as an end in itself. “I’m not big on referendum and the people deciding,” he told The Epoch Times.

“Thankfully, the people did not decide on the American Constitution,” he added, referring to the Constitutional Convention of 1787. “They decided through representatives, but they didn’t decide directly. Who knows how that vote would have gone?”

Brook suggested instead that Puerto Rico hold a convention to decide the matter.

Despite being in favor of the status quo, Brook acknowledged there are pitfalls to the current governance system. While he is generally in favor of lower taxes and less regulation, Brook criticized the island’s legal system for disproportionately favoring the wealthy.

“There’s a lot of tax breaks for special deals, but what they don’t do is tax breaks for Puerto Ricans, which is the sad part.”

Zero percent taxes on capital gains and dividends are very attractive for asset holders, but more than 50 percent of American assets are owned by the top 1 percent of the population. Average Puerto Ricans are unaffected by these tax breaks, but are still required to pay the island’s 10.5 percent sales tax.

“Don’t give me any tax advantages,” Brook said. “Just make it attractive for Puerto Ricans so that I want to become a Puerto Rican.”