Puerto Rico governor introduces $550 million tax reform plan

Puerto Rico Gov. Jenniffer Gonz?lez Col?n introduced a $550 million tax reform plan that would reduce rates for those earning less than $90,000 a year and raise the deduction for dependents.

The governor and the head of the island's Office of Management and Budget said the tax reform costs will be offset by reductions in certain government spending, application of excess revenues that are coming in, and elimination of certain tax exemptions.

The tax reform, proposed earlier this week, includes lower income tax rates for those earning between $25,000 and $90,000 and an increase in the deduction for dependent minors to $5,000 per child from $2,500.

The governor hopes these changes will affect tax forms filed for the next tax deadline, April 15.

"Tax reform for Puerto Rico is necessary but must be fiscally responsible and compliant with the fiscal plan," the Puerto Rico Oversight Board said in a statement. "The Oversight Board will continue to work together with the governor and the legislature on responsible reforms to simplify the complex and burdensome tax code of Puerto Rico while ensuring sufficient resources for financial plan needs."

The Puerto Rico general fund is $13.1 billion in the current fiscal year, which ends June 30. Puerto Rico's general obligation bonds are supported by the general fund.

The board's June 2025 Puerto Rico certified fiscal plan said the commonwealth's taxes are "complex and opaque," with "numerous targeted deductions, exemptions, credits, and special rates that benefit narrow groups of taxpayers."

Gonz?lez Col?n plans to introduce a second stage of tax reform, which would affect exercise taxes on vehicles and corporations. She has said she is seeking offsetting forms of revenue or expenditures to pay for that.

The board has spoken of the necessity to reform the island's property tax system and perform a new assessment of property tax values. Property taxes provide funds for municipal governments and any changes would affect the amount of financial support the territorial government would need to give.