Newspaper article St Louis Post-Dispatch (MO)

The Struggle over Section 936

Newspaper article St Louis Post-Dispatch (MO)

The Struggle over Section 936

Article excerpt

A rip-off for taxpayers?

A savior of Puerto Rico's economy?

An important source of innovation for life-saving drugs?

These descriptions all apply to Section 936 of the Internal Revenue Code, depending on whom you ask.

Section 936 gives companies tax breaks for manufacturing products in Puerto Rico as a way of boosting the commonwealth's economy.

But the Reagan, Bush and Clinton administrations assailed Section 936 as boosting corporate profits more than workers' well-being.

At the same time, an unusual alliance of liberal U.S. legislators, conservative business executives and Puerto Rico government leaders vigorously defended Section 936.

The Congressional Budget Office said Section 936 - if unchanged - would have sucked $15 billion from taxpayers between 1993 and 1997. The newly revised law will cut that amount to $11.25 billion.

Last year, the General Accounting Office, the investigative arm of Congress, said the tax savings for many drug companies from Section 936 far outweighed the wages they provided to residents of the commonwealth.

The GAO said drug companies got half the tax breaks from Section 936 but employed fewer than 20 percent of the workers hired under this program.

But large and small businesses rallied to protect the tax-break program, which is the descendent of a U.S. policy created in 1921. …

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