On June 11, Puerto Ricans headed to the polls to vote in the island's fifth referendum. The perpetual question: do residents want the US territory to become the 51st state? While 97 percent of voters favored statehood over total independence or remaining a self-governing territory, only a low 23 percent of eligible electors cast ballots — the lowest turnout in a Puerto Rican election since 1967. While the results are being questioned, it's now up to the US Congress to decide how to move forward. But what does it all mean and is it actually possible for Puerto Rico to become another star on the US flag? Keep reading for a little history on Puerto Rico, the island's financial status, and what could happen next.
1. How did Puerto Rico become a US territory?
Puerto Rico has been a territory of the United States since Spain ceded the colony in 1898. Since 1917, under the Jones-Shafroth Act (aka simply The Jones Act), Puerto Ricans have had US citizenship and unrestricted rights to move to the mainland. It was not until 1947 that Puerto Rico could vote for its own governor, and until 1952 that the island received the constitutional right to govern its own internal affairs. With its current unusual legal status (neither independent nor state), residents cannot vote in the US presidential elections. They do not have voting representation in the House or seats in Congress, nor do they make payments to federal taxes. However, they do pay into Medicare, Medicaid, and Social Security taxes.
2. Isn't the Jones Act about shipping laws?
Yes and no. The Jones Act of 1917 was the legislation that gave Puerto Ricans US citizenship and the ability to create internal branches of government. The other Jones Act is Section 27 of the Merchant Marine Act of 1920, which prevents foreign-flagged ships from carrying cargo between the US mainland and noncontiguous parts of the US (also inclusive of Hawaii, Alaska, and Guam). While the latter is under great debate for its negative impact to the Puerto Rican economy, the current vote is related to citizenship.
While we're discussing it, though, you should know the island's import demand is high, but their supply is low. The Jones Act (the one about shipping laws) leads to the use of very costly US-built ships and American crews for all sea transport to and from Puerto Rico. Some estimate that leads to an increased cost of 15 to 20 percent on all products sold in Puerto Rico.
3. What's Section 936 and what does it have to do with Puerto Rico's economic crisis?
After World War II, to increase investment and boost the economy, many development programs were started. One in particular, Section 936, gave US companies tax exemptions on income earned in Puerto Rico. In a New York Times article published in 1993, the tax break is explained as an "expensive giveaway" to corporations. When the tax break hit its expiration date in 1996, many companies flee the island, kickstarting a recession and economic crisis that continues to date.
4. Have they tried passing other tax breaks that will bring companies back to the island?
Oh, yes! In 2012, the island passed multiple bills approving competitive tax incentives for a range of businesses in an effort to promote foreign direct investment to stimulate the economy: Act 20 (Export Services Act) for the purpose of promoting services in Puerto Rico (i.e. hedge funds, professional service firms, software companies, etc.) and Act 22 (Individual Investors Act) for "bona-fide" residents of Puerto Rico who spending 183 days a year in the island would be exempt of taxes on dividends and capital gains.
5. So why are they not bouncing back?
As of May 2017, the Caribbean island's debt amounts to $72 billion. The unemployment rate is currently as high as 12 percent and over 40 percent of the population lives beneath the poverty line. The middle class is aggressively leaving the island for opportunities in the mainland, leading to "brain drain." The newly elected governor, Ricardo "Ricky" Rossello, believes that the solution to this recession is full statehood, since it would open Puerto Rico to more foreign investment and make the US responsible for its national debt.
6. Why didn't people show up to vote?
This past vote had the poorest numbers in the country's history, but there's a reason. Anti-statehood groups boycotted the vote. The New York Times reports that ballots have in past referendums (2012, 1998, 1993, and 1967) featured confusing wording that seemed to benefit the party in power.
7. So should we add another star to the US flag?
Not yet, but the process is moving ahead. According to The New York Times, nonvoting member of the House Jenniffer González is drafting a bill and presenting it in Congress to request Puerto Rico become the 51st state. Advocates for statehood will work to persuade a currently Republican-lead Congress to agree to take on this addition. It'll be a difficult task, given that this motion would potentially lead to two more democrat seats in Congress, and potentially five more in the House of Representatives — Puerto Rico has historically been a liberal-leaning territory.