San Juan, PR – January 30, 2026 – The Financial Oversight and Management Board for Puerto Rico today issued the following statement:
The Oversight Board is fully aware of the considerable burden Puerto Rico’s current tax framework imposes on taxpayers. The Oversight Board believes that tax reform is essential for Puerto Rico’s return to sustainable economic growth.
The President of the Senate of Puerto Rico and the Speaker of the Puerto Rico House of Representative, respectively, requested the Oversight Board’s review of Governor Jenniffer González Colón’s administrative proposal to permanently reduce personal income tax rates, introduced on January 12, 2026, as Senate Bill 912 and House Bill 1014.
While the bills do reduce the tax rates for many taxpayers, it does not constitute a broad, holistic, or integrated tax reform that would position Puerto Rico for long-term economic growth, as the Government and the Oversight Board consistently discussed. An effective tax reform must be comprehensive, holistic, and for the long term. Puerto Rico needs a fairer and more effective tax system.
However, the Oversight Board concurs with the Government that individual taxpayers in Puerto Rico should be afforded some degree of relief within available resources.
The Oversight Board’s preliminary review of Senate Bill 912 and House Bill 1014 shows that net revenue collections for the current fiscal year ending June 30, 2026, would decline by approximately $370 million ($563 million cost vs. $193 million offsets).
During the last four fiscal years, the Government’s tax collections have remained relatively flat and are projected to decrease in the current fiscal year 2026, which could suggest a slight decline in local economic growth. The bills would therefore significantly reduce government revenues without identifying a recurring replacement of the permanent revenue loss.
The Oversight Board recognizes the value of the bills’ intention to reduce the tax burden of individual taxpayers. Nevertheless, any tax changes must be fiscally responsible. The Oversight Board consistently opposed ad hoc tax legislation that materially affects the Commonwealth budget outside a disciplined budget process. The Government must evaluate the impact on the current year budget and the 5-year financial planning period when it considers legislation that affects its financial position. Only then can we ensure that legislation does not threaten the fiscal stability the Oversight Board and the Government together have achieved for Puerto Rico in recent years.
The fiscal impact of tax-related legislation should also be evaluated within the broader context of multiple tax measures enacted or currently under consideration, many of which also have material fiscal implications for Commonwealth and municipal revenues.
Further, any discussion regarding long-term needs, obligations, or resource availability must necessarily include the expiration of current levels of Medicaid funding in fiscal year 2028 and recurring government budget priorities, requests to increase salaries, and funding municipal governments and services, among others.
While the Oversight Board cannot support the tax reduction proposal of the bills, one potential source of assistance to individual taxpayers could be a non-recurring reimbursable incentive or rebate in an amount consistent with the rate changes offset by the elimination of the discount to taxpayers to be distributed among the group of individual taxpayers that would have benefited from the proposal of the bills.
The Oversight Board will continue to work with the Governor and the Legislature towards a truly comprehensive, holistic tax reform with a focus on addressing Puerto Rico’s current economic and demographic challenges and that can contribute to Puerto Rico’s competitiveness as a critical part of its economic development.