A federal judge has ruled that a law enacted by Puerto Rico’s government to charge Wal-Mart more than three times the rate it charges other companies is patently unconstitutional. Wal-Mart is the only company on the island with revenues anywhere close to the $2.75 billion level to which the law applies.
While Governor Garcia Padilla suggested the decision took $100 million away from the people of Puerto Rico and gave it to Wal-Mart, the decision had the exact opposite effect—a ruling against Wal-Mart would have done far more damage to Puerto Rico and Puerto Ricans.
Wal-Mart operates 48 stores across Puerto Rico, employs about 14,300 people (second only to the Puerto Rican government), pays its workers a minimum of $10 per hour—well above both the minimum ($7.25 an hour) and median ($9.42 an hour) wages in Puerto Rico—purchases about $1.6 billion’s worth of products from local vendors and suppliers, and currently pays about $40 million in income taxes to the Puerto Rican government.
Losing Wal-Mart would be a devastating blow to the struggling Puerto Rican economy—much more so than the alleged $100 million in lost tax revenues. But that’s precisely what the tax would do—drive the retailer off the island.
Companies that don’t make profits can’t stay in business, and Wal-Mart noted that it would not be able to maintain its Puerto Rico operations for long under the tax.
Fortunately for the people of Puerto Rico who receive jobs, low-priced goods, and a market to sell their products, this unconstitutional tax will not drive Wal-Mart out of Puerto Rico.
In other words, Puerto Rico cannot use Wal-Mart as a cash reserve account. In ruling Puerto Rico’s Wal-Mart tax unconstitutional, the federal judge in San Juan noted that “the Commonwealth should not rely on revenue that it’s not entitled to.”