The Puerto Rico Crisis, Explained

Ted

FYI: On Monday, Puerto Rico is expected to skip payment on $389 million in debt owed by the island's Government Development Bank to bondholders. Gov. Garcia Padilla of Puerto Rico has been warning for over a year that this government will be unable to fully pay what it owes, and has asked Congress to provide for a structured path to bankruptcy. He didn't get it, largely due to opposition from congressional Republicans, so he is now being forced to resort to unilateral repudiation of debt.

"Faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice," he said "I decided that essential services for the 3.5 million American citizens in Puerto Rico came first."
Regards,
Ted
http://www.vox.com/2015/7/1/8872553/puerto-rico-crisis

msf

Very good explanation. The only thing I'd add is that PR is not the only entity that gets tax-exempt status for its bonds in all fifty states. So do some other US territories, including the US Virgin Islands, Guam, and the Northern Mariana Islands.

The US has 13 territories, two of which are commonwealths. (For your question of the day, Puerto Rico and what other territory? Answer below.) Apparently the tax laws for these territories are all over the map (ouch).

I for one was not aware of most of this. I ran across this document entitled FEDERAL TAX LAW AND ISSUES RELATED TO THE UNITED STATES TERRITORIES. Upon browsing through it, one begins to see how changing tax laws could so foul up Puerto Rico.
https://www.jct.gov/publications.html?func=download&id=4427&chk=4427&no_html=1




The territory in question is Northern Marianas that is a commonwealth.

Ted

@msf: Very familiar with the Marianas Islands. I was stationed for eighteen months 1955-1957 at the Naval Communication Station Agana Guam.
Regards,
Ted
Map Marianas Islands:
http://www.infoplease.com/atlas/state/northernmarianaislands.html