Watch out, Connecticut. Heads up, New Jersey. And New York had better pay attention, too.
Puerto Rico is coming after one of your lucrative industries — the ultra-high net-worth financial advisory business, also known as “family offices.”
In late February, I’m told, Puerto Rico invited representatives of 150 family offices to the island. The agenda was not only to get them to invest in Puerto Rico but also to proposition them to move their operations to the unincorporated territory of the US.
The pitch, according to someone who was invited, was that income tax for those who moved would be only 4 percent a year. That compares with around 7 percent for high-income people who work in Connecticut, nearly 9 percent in New York state and about 11 percent in New Jersey.
New York City also collects up to nearly 4 percent on big incomes in addition to what the state gets.
Of course, wealthy people use tax dodges like trusts to protect income from taxation. But still, the lure of low-tax Puerto Rico has been good enough in the past to bring industries like pharmaceuticals to the island.
The junket for family offices was held on Feb. 26, I’m told. I don’t know how long it lasted. But the guests were put up at the swanky Condado Vanderbilt Hotel in San Juan and all expenses were paid — although the people invited surely didn’t need freebies.
Incidentally, the Condado Vanderbilt and sister hotels are owned by Paulson & Co.
John Paulson, head of that firm, said earlier this year that he might get out of the hedge fund business and turn his billion-dollar fortune over to a family office of his own.
A Paulson spokesman wouldn’t comment on whether the company will move to Puerto Rico. It’s now located in Manhattan.
The one catch is that anyone working at a family office that relocates to Puerto Rico would have to spend at least half the year on the island or lose the tax break. But the family offices reps were told that anytime they traveled off the island on business, it would be counted toward their residency requirement, according to my sources.
I have a call into Puerto Rico officials to see if anyone took them up on the offer or was investing. As you probably heard, Puerto Rico was devastated by Hurricane Maria in 2017.
Island officials and others have criticized the Trump administration’s response to the devastation.
Puerto Rico has its own tax laws, and only some residents pay federal taxes. Most, I’ve read, don’t have to pay any personal income tax to Washington. So this would make a move to Puerto Rico even better than a relocation to Florida, where people pay no state income tax but still have to give up to 37 percent in taxes to Washington.
Many financial companies have already left the tristate area for the Sunshine State. Appaloosa billionaire David Tepper has left New Jersey and moved himself and his firm to Miami.