By: Israel Ortega, Editor

Also, see similar articles here, here, and here, and read tomorrow for a follow up analysis by Marshall Kirby.

As our country weathers one of the worst economic recessions in its history, the tax debate in Congress continues. The outcome of these negotiations will have huge consequences for the coming year. To see why this debate is so important, we need only look to Puerto Rico to appreciate the effects of both good and bad tax policy.

Led by Gov. Luis Fortuno, Puerto Rico has been undertaking bold and courageous efforts to implement an aggressive economic model. Despite facing harsh critics, it has met with considerable successes. Washington, D.C. lawmakers should take note.

The island of Puerto Rico is small. But Puerto Ricans have made indelible contributions to our great country.

But just a couple of years ago, the Island of Enchantment was at the brink of economic collapse. As The Wall Street Journal’s Mary O’Grady reported, “Puerto Rico had a 46% budget shortfall and was close to being downgraded to junk status.” The main culprit was an exceedingly high corporate tax rate that was scaring off potential investors. Additionally, the governor’s office in San Juan had been responsible for unchecked runaway spending, leaving in its wake a budget shortfall equal to $3.3 billion.

Sound familiar? If it does, that’s because there are eerie parallels between Puerto Rico’s failed economic policies and what some here in Washington are proposing to get our economy back on track.

2010 will go down in the books as one of the costliest years for every single American taxpayer. The year started out with a nearly $800 million “stimulus” plan, followed by a health care law that will cost close to $1 trillion (over the next 10 years). And that, of course, does not include the soon-to-be-signed-into-law omnibus bill that will fund all of our government agencies. In this vein, it shouldn’t surprise us that the electorate spoke a few weeks ago demanding a fresh break from this dangerous course.

Of course, some still don’t get the message.

In addition to inserting millions upon millions of dollars of spending into the flurry of bills being approved in the dead of night, some lawmakers want to raise taxes. They argue that we need to raise taxes on families earning more than $250,000 because it’s the right thing to do. What they won’t tell you is that many of those families earning more than $250,000 a year are also small business owners who employ Americans all across this country. If politics is a game of perception, the Left is an expert in class warfare, championing itself as the protector of the working class.

These were some of the same arguments made by detractors of Gov. Fortuno as he embarked on a bold plan to cut government spending while cutting taxes. He was called heartless by critics when laying off government workers, and a protector of the wealthy as he cut the corporate tax rates.

Fortunately for the governor, and more importantly for the people of Puerto Rico, he is being vindicated for his boldness and steadfastness in refusing to accept that raising taxes is ever a good idea. Not only is Puerto Rico no longer in danger of being indefinitely shunned by international investors, this small and vibrant island is giving Washington, D.C. lawmakers a blueprint for a successful economic policy plan.

Raising taxes is terrible policy. Even President Obama now agrees. Let’s hope that he continues to defy the shrillest voices in his party as Congress crafts an agreement on this important issue. Our economy is counting on it.

Israel Ortega is the Editor of, a Spanish language site of The Heritage Foundation, a non-partisan think tank located in Washington, D.C.

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