{"id":49527,"date":"2014-04-08T13:15:22","date_gmt":"2014-04-08T17:15:22","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=49527"},"modified":"2014-04-08T13:15:22","modified_gmt":"2014-04-08T17:15:22","slug":"really-moved-puerto-rico","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2014\/04\/08\/really-moved-puerto-rico\/","title":{"rendered":"Why I REALLY Moved to Puerto Rico, and You Should Too"},"content":{"rendered":"<h4><span style=\"font-size: small;\">By Alex Daley, Chief Technology Investment Strategist, Casey Research<br \/>\n<\/span><\/h4>\n<p>Much fuss was made yesterday when my colleague Nick Giambruno released a report outlining the incredible tax benefits to be had, by Americans no less (the only people in the world to be taxed back home even when we leave), in Puerto Rico.<iframe loading=\"lazy\" src=\"http:\/\/trk.caseyresearch.com\/f\/?editorial=why-i-really-moved-to-puerto-rico-and-you-should-too\" height=\"1\" width=\"1\" frameborder=\"0\"><\/iframe><\/p>\n<p>As you may have seen, that report was based in large part on my personal experience relocating to the island, a process I started in earnest last October. And, yes, I am here, writing you at this moment from beautiful Palmas Del Mar\u2014if you ask me, the most beautiful piece of coastland on the island, but only just being rediscovered after a long hiatus from the spotlight.<\/p>\n<p>What can I say, I love a comeback story, especially when it looks like this\u2026<\/p>\n<p style=\"text-align: center;\"><img decoding=\"async\" style=\"width: 600px; height: 288px;\" alt=\"\" src=\"http:\/\/d1w116sruyx1mf.cloudfront.net\/ee-assets\/channels\/article_default\/140404image3.jpg\" \/><\/p>\n<p>Yes, my decision to move to Puerto Rico was influenced by the tax incentives. But they were only one contributing factor. Why I chose to land in Puerto Rico is much more nuanced than that.<\/p>\n<p><strong>It all boils down to one thing: Opportunity.<\/strong><\/p>\n<p>Everyone likes to save on taxes. That\u2019s a given. But if I\u2019ve learned one thing in my short business life thus far: it\u2019s that it\u2019s always better to make $4 than to save $2.<\/p>\n<p>No disparagement intended to Ben Franklin, but a penny saved is <em>not<\/em> a penny earned. Not if, in the time and effort saving it took, you could\u2019ve created two or four or eight more pennies for yourself.<\/p>\n<p>I\u2019m here in Puerto Rico because I believe it will provide me with the opportunity to make many more pennies.<\/p>\n<p>Here\u2019s why.<\/p>\n<h3><strong>Infrastructure and Convenience<\/strong><\/h3>\n<p style=\"margin-top: 10px;\">Unlike many other low-tax jurisdictions, Puerto Rico is in the unique position of having been a US territory for a century now. That means all sorts of things, from familiar legal systems to easy travel. But one of the most surprising implications is that US companies and even certain US government agencies have a presence down here.<\/p>\n<p>My town is a few miles down the road from the world\u2019s fourth-busiest Walmart. There is a Costco here. Closer, in fact, than the one we had in Vermont. There\u2019s also a Cartier\u2014I\u2019m not much of a jewelry buyer, but you get my point. Many if not most of the conveniences of the US are to be had here.<\/p>\n<p>And the same goes for far more than shopping. The highways across the island are much like in the US, including, unfortunately, the traffic into and out of the big city. But I\u2019ll take that any day over the frightening, windy back roads that litter Jamaica, Grenada, St. Kitts, the Caymans, and many of the other places considered before settling on this place. And gas here is just a tiny fraction more expensive than back in the States.<\/p>\n<p>Of course, roads rarely matter for me since I work from home, where my simple Internet connection is at least 10 times faster than the one in the office in Vermont\u2014courtesy of Liberty cable. My cell phone, on AT&amp;T, works <em>much<\/em> better here too.<\/p>\n<p>What\u2019s not the same here (they have the FBI, DEA, etc.) is at least comfortingly familiar (courts, MPH speed limits, and AutoExpreso, i.e., EZPass). But most importantly, it\u2019s fully developed. There\u2019s no grass hut customs office, no lack of a UPS store\u2014the entire infrastructure needed to run a business well is here.<\/p>\n<p>We tend to lose power often, yes. A few times each month for a few hours at a time. And electricity rates are about twice as high as in the States, though we use so much less of it here without any need for heat and barely any for AC. Still, the power bill can be a drag. But not everything can be perfect, even when the weather is:<\/p>\n<p>86 and sunny. All year. \u2018Nuff said.<\/p>\n<p style=\"text-align: center;\"><img decoding=\"async\" style=\"width: 538px; height: 105px;\" alt=\"\" src=\"http:\/\/d1w116sruyx1mf.cloudfront.net\/ee-assets\/channels\/article_default\/140404image4.jpg\" \/><\/p>\n<p>Though my belly says differently, I like to exercise. I spent the last decade of my life split between some of the rainiest and snowiest locations in the US. And I <em>hate<\/em> gyms.<\/p>\n<p>Since coming here, I\u2019ve lost 14 pounds and counting, just from getting outside to swim, walk, golf, and play tennis\u2014activities that have been closed (to me) most of the year, and that apparently constitute enough caloric burn to make up for my awful, airport-heavy diet. I have more energy, I feel better.<\/p>\n<p>Many people are looking for that same lifestyle. Which, ironically, makes it far easier to recruit talent to the island than to many mainland destinations. I\u2019ve already convinced a handful of people to make the move, and I\u2019m not even actively hiring down here just yet\u2014I\u2019m waiting for some red tape to clear.<\/p>\n<p>If you\u2019re thinking of starting or expanding a business, think carefully about whether it will be easier to recruit people to the tax-free (state tax-free only, mind you) zone in Albany, NY, to the expensive and tiny island of St. John, or to a country bigger than Rhode Island or Delaware with year-round sunshine.<\/p>\n<p>But it\u2019s not like I need to recruit that many people here. There are already plenty here.<\/p>\n<h3><strong>Labor, Services and Networking<\/strong><\/h3>\n<p style=\"margin-top: 10px;\">The other day, during one of those intermittent power outages, I took the opportunity to swing up to Sam\u2019s Club and pick up a few things\u2014all commercial sites, and most high-end homes, have generators to cope. $400 worth of crap I didn\u2019t really need later, I was waiting in line at the checkout, as the obligatory pile of cash was counted out at the register in front of me (almost no one here uses bank accounts or credit cards, and it\u2019s part of their well-known fiscal troubles\u2026).<\/p>\n<p>While waiting, I told my wife about my struggle finding qualified PHP developers. These are jobs that pay $40-50\/hour, i.e., $60K to $100K\/year, and way up from there. Yet it takes us months to hire for them. The woman behind me in line must have overheard our conversation, because she started asking me if I worked for Palmas and were we hiring\u2014she\u2019d applied a dozen times already.<\/p>\n<p>She, like many others here, was looking for work. The official unemployment rate is 15%. According to the CIA World Factbook, it\u2019s 26%. The median household income is also a relatively low $18,000\/year. That\u2019s double most places in the Caribbean, but still quite low compared to the States. Looked at societally, that\u2019s bad. For a business operator, though, it has distinct advantages.<\/p>\n<p>Yes, with high unemployment comes crime. But the reputation this island has garnered in the States is undeserved. The crime rate in San Juan is about the same as in Baltimore, Detroit, Cleveland, or Atlanta. Any large city has crime-ridden areas. But like those cities, San Juan has wonderful neighborhoods too. And it\u2019s surrounded by some beautiful suburbs. Go into the country, like I did, and it\u2019s calm and quiet and borderline idyllic.<\/p>\n<p>Our community is triple gated (community, development, building), which garners comments from friends and family who visit. But it doesn\u2019t need to be. It reminds me of the much more unsightly seven-foot walls with razor wire and broken-glass tops in Spain\u2019s posher areas, which are 90% to convey status. Once you understand the small cultural differences, not moving here because of crime is like not moving to Missouri because of St. Louis, to Florida because of Miami, or to Tennessee because of Memphis.<\/p>\n<p>When you do go to hire, employment laws are close to the same here as in the States. They have Social Security, Medicare, and worker\u2019s comp. Workers from the mainland can come here without a visa (and vice versa). It\u2019s familiar, yet there is a big labor surplus holding down wages.<\/p>\n<p>I\u2019ve been thinking about starting a call center down here\u2014just searching for the right person to run it (I\u2019ve got a job I love and don\u2019t need another one)\u2014as it\u2019s an ideally suited location:<\/p>\n<ul>\n<li><strong>A highly educated population<\/strong>. 94% literacy rate (India is 78%; China 96%). A 67% high school graduation rate (about the same as Florida and Georgia; well above Nevada, Louisiana, Mississippi, etc.). 22% of the working population have college degrees, not far behind the States\u2019 33% average and well ahead of many of those same southern states.<\/li>\n<\/ul>\n<ul>\n<li><strong>Better average English skills than India<\/strong> or other common call center locations. 50% English-speaking population, versus 21% in India. In reality, I rarely meet anyone who doesn\u2019t speak enough to get along fine with me, a dolt who has yet to learn the language here. But for working purposes, about half the population speaks English.<\/li>\n<\/ul>\n<ul>\n<li><strong>No time zone issues<\/strong>. It\u2019s the same time here as Florida or New York (though here they are smart enough not to observe the idiotic tradition of \u201cdaylight savings\u201d\u2014it\u2019s the same amount of daylight here all year round and I never have to go to or leave work in the dark, let alone do both for months at a time).<\/li>\n<\/ul>\n<ul>\n<li><strong>And plenty of available labor to expand rapidly.<\/strong> The population of Puerto Rico is 3.7 million, a number that is slowly shrinking as more and more people emigrate to the US in search of work\u2014something they can do freely as all Puerto Rican citizens are US citizens.<\/li>\n<\/ul>\n<p>One of these days\u2014hopefully soon\u2014I\u2019ll find that call center operator who will work for sweat equity to get things off the ground, or the bootstrap customer to pay them. But the labor is there.<\/p>\n<p>And not just labor for lower-skilled work, either. The island has a very large skilled labor population, too, thanks to that high college degree rate. There are hundreds of law offices, accountants, engineers, and other professional firms. Investment banks, construction companies, you name it. The colleges here are strong in math and business. And virtually any service provider or knowledge worker you\u2019d look for in any other major metropolitan area can be found here. I\u2019ve even got investment bankers knocking on the door.<\/p>\n<p>Then there are the other entrepreneurs. One of the things that attracted me most to Puerto Rico wasn\u2019t the tax incentives themselves, but the idea of living near and collaborating with so many like-minded people. And that\u2019s proven as good or better than I hoped. Between everyday social activities and organized mixers like the meetings of the \u201cAct 20\/22 Society,\u201d there has been a non-stop barrage of new people to meet, all of whom are as entrepreneurial as I am. Business ideas floated around dinner, hiring tips over golf, late-night real estate investment discussions, dozens of emails to share investment ideas\u2014all just this week.<\/p>\n<p>The one thing that really stuck with me when I read <em>Rich Dad, Poor Dad <\/em>many years ago was the part that <em>if you don\u2019t hang around with the kind of people who talk about money and how to make money, then you\u2019ll never learn how or find opportunities to make more of it<\/em>. In life, I have always looked for those kinds of communities, and every place I\u2019ve lived I\u2019ve found small pockets of like-minded people. But here, it\u2019s like I just struck pay dirt.<\/p>\n<h3><strong>Ease of Starting and Operating a Business<\/strong><\/h3>\n<p style=\"margin-top: 10px;\">The same factors that make hiring in Puerto Rico easy make starting a business simple here too.<\/p>\n<p>I fully intend to learn Spanish\u2014it\u2019s good for me, and good for the kids too. But I cannot be expected to do so in a matter of months, and certainly not as a prerequisite to doing business. Thankfully, that\u2019s not been an issue at all.<\/p>\n<p>All federal laws and forms are available in English, for one. Just about everyone you deal with in the business and government world speaks enough English to help you, and the majority, especially the younger population, speak it very well. Unlike farther-flung Spanish-speaking countries like Belize and Panama, running into someone at the local government office who cannot speak enough English to help you rarely happens here, except far outside of the cities. When it does, there are lawyers and accountants everywhere to help.<\/p>\n<p>LLCs, partnerships, corporations, and all that other stuff is effectively the same here as in the US. Payroll services can be had from US companies like ADP or from local ones. Same with insurance for your business, cars, health, and more. Banks are a little slower than in the US, but offer the same services like ACH, wires, credit lines, online access, etc. It\u2019s familiar, simple, and not overly burdened with red tape\u2014you can even set up a corporation online in a few minutes.<\/p>\n<p>Sure, there are some tough parts about starting a business here. For one, they\u2019ve yet to come to terms with virtual work, and the idea is at direct odds with one of their most stubborn bureaucracies: the town office permit folks.<\/p>\n<p>On the US mainland, at least anywhere I have lived, you do not need any special permit to use your home as an office, only as a retail business. Want to found an Internet startup from your garage? No problem. Want to sell antiques from your front lawn? Problem. In Puerto Rico, the model is backwards. To set up an office, you <em>must<\/em> register it with the town. The towns inspect your office to make sure it is real. They contact your neighbors to make sure they are OK with it. And they come back regularly to do it again and again.<\/p>\n<p>That struck me as odd at first. But the more I considered it, it\u2019s not much different than in the States: to own a business in Vermont, I needed half a dozen forms from half a dozen offices and paid a fee for each one. I didn\u2019t have to pay a fee to get a sales and use tax permit in Puerto Rico, though. They don\u2019t want to get in the way of my ability to pay taxes, as so many US agencies seem to want to. Instead, they are focusing on a different set of problems. Ones unique to a largely urban island with high unemployment. Like trying to stop the streets from looking like a Turkish bazaar as they do elsewhere around the Caribbean\u2014something they\u2019ve managed very well here.<\/p>\n<p>The quirks are just different from the quirks many of us grew up with, because the circumstances are different. But it\u2019s the big things that matter\u2014things like tax policy, access to smart people, services, technology, and more. And there, Puerto Rico scores very highly.<\/p>\n<h3><strong>And, Yep, Lower Taxes<\/strong><\/h3>\n<p style=\"margin-top: 10px;\">I work hard for my money. I work hard to find great investments that translate into profits. And I work hard to run my businesses. And the more of each I get to keep, the more I earn next year by investing it further.<\/p>\n<p>Hopefully, growing up, someone taught you about the magic of compounding interest (I got it from my dad, who more than once said, \u201cHey, read this article on mutual funds in <em>Esquire<\/em>.\u201d) Well, one of the things almost none of those lessons include is the effect of taxes. When you pay taxes on your investment income, it decreases dramatically over time. The longer you can defer taxes, the better for your pocket book. If you can reduce them or remove them entirely, the benefits are huge.<\/p>\n<p>For instance, say you invest $100,000 in a 5% CD that compounds yearly. If you pay 35% tax on the interest each year, and reinvest the rest, then at the end of 20 years you\u2019ve earned $89,583 in interest. Not bad for an incredibly conservative investment.<\/p>\n<p>However, take those taxes on interest down to 0%, which Puerto Rico\u2019s new tax incentives provide, and you earned $165,329, or 85% more income. That\u2019s a pretty big tax penalty the US imposes, and that many more years you have to work before you can retire.<\/p>\n<p>If you live in California, where the combined tax rate for some is now in excess of 50%, the effect is even more dramatic. You would have only earned $63,861, losing out on over $100,000 in earnings. That\u2019s enormous!<\/p>\n<p>Yes, you could earn $165K inside an IRA thanks to tax deferral. But then try withdrawing it. At 39.6%, federal taxes chip it right down to $99,858. Get stung by that California 50% and you\u2019re even worse off again.<\/p>\n<p>Now, here\u2019s the real kicker. In order to invest that $100K back home, you already had to pay taxes on it \u2014they don\u2019t let you put nearly that much in an IRA or 401(k) each year. Before you paid those payroll taxes, it was probably $165,000 (assuming the same 39.6% in federal taxes). If instead you earned that income in Puerto Rico at a net effective tax rate of 15%\u2014which can be easily achieved with Act 20 benefits for your business and a 4% tax on earnings\u2014then you would have $147,283 to invest to begin with.<\/p>\n<p><strong>After 20 years at 5%, you\u2019d have saved $243,500 for your retirement\u2014that\u2019s nearly <em>three times<\/em> what you would have earned in the United States, getting taxed again and again and again. Or about 2.5x what your IRA or 401(k) would have netted you.<\/strong><\/p>\n<p>It\u2019s not about how much money you have to invest. It\u2019s how much you have to <em>reinvest<\/em>. And a big part of that is how much you have left over after taxes. Here in Puerto Rico, you could have <em>much<\/em> more left over, and many more opportunities to invest.<\/p>\n<h3><strong>The New Land of Opportunity<\/strong><\/h3>\n<p style=\"margin-top: 10px;\">To me, this is the new land of opportunity. There is a critical combination here of an underutilized but well-educated workforce, a culture that is obviously changing for the better, and a tax regime that is committed to letting entrepreneurs reinvest more of our money back into our businesses.<\/p>\n<p>Add those three together, and there would be something good going on down here. But there\u2019s another factor: The Internet. With the ability to do many jobs from the convenience of anywhere, thanks to Skype, GoToMeeting, Gmail, Dropbox, and thousands of other tools that finally make the home office a reality, the opportunity is enormous. Computer programming. Asset management. Graphic design. Public relations. Marketing and advertising. Research and development. Information processing. Customer service. The number of service-based businesses that can operate from here is amazing\u2014far more potential than the manufacturing sector ever brought.<\/p>\n<p>Puerto Rico is off to a slightly slower start than its predecessors in India, Singapore, Hong Kong, and even around Latin America in recognizing the value wooing the service economy can bring to its people. However, it is on the right course now and has some tail winds to help it catch up\u2014advantages that no other nation on earth can provide to the world\u2019s largest market of investors and entrepreneurs, Americans.<\/p>\n<p>It\u2019s hard for me to sum up all the things I like about Puerto Rico in a few pages\u2014and there\u2019s no way the editors here will let me go longer, lest I bore you to death. But if you made it this far, then I encourage you to go one step farther. Consider joining me and your like-minded investors and entrepreneurs in Puerto Rico. Join me and the 200 or so other pioneers here in the new land of opportunity. <a href=\"http:\/\/www.caseyresearch.com\/go\/v42x8-2\/PIP\" target=\"_blank\">Read my firsthand account of how, right here.<\/a> And feel free to ask me any questions you\u2019d like\u2014in the comments below, or <a href=\"mailto:alexdaley1@caseyresearch.com?subject=Questions%20for%20Alex%20%5Bxc31%5D\">via email<\/a>.<\/p>\n<div id=\"xvMdV95u77zU\" style=\"clear: both;\">The article <a href=\"http:\/\/www.caseyresearch.com\/go\/v49i9-2\/PIP\" rel=\"permalink\">Why I REALLY Moved to Puerto Rico, and You Should Too<\/a> was originally published at <a href=\"http:\/\/www.caseyresearch.com\/go\/v49na-2\/PIP\">caseyresearch.com<\/a>.<\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>By Alex Daley, Chief Technology Investment Strategist, Casey Research Much fuss was made yesterday when my colleague Nick Giambruno released a report outlining the incredible tax benefits to be had, by Americans no less (the only people in the world to be taxed back home even when we leave), in Puerto Rico. As you may &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/forex-news\/2014\/04\/08\/really-moved-puerto-rico\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Why I REALLY Moved to Puerto Rico, and You Should Too&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-49527","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/49527","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=49527"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/49527\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=49527"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=49527"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=49527"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}