<P> In addition, because the cutoff point for income taxation is lower than that of the US IRS code, and the per - capita income in Puerto Rico is much lower than the average per - capita income on the mainland, more Puerto Rico residents pay income taxes to the local taxation authority than if the IRS code were applied to the island . That occurs because "the Commonwealth of Puerto Rico government has a wider set of responsibilities than do U.S. State and local governments ." As residents of Puerto Rico pay into Social Security, Puerto Ricans are eligible for Social Security benefits upon retirement but are excluded from the Supplemental Security Income (SSI) (Commonwealth of Puerto Rico residents, unlike residents of the Commonwealth of the Northern Mariana Islands and residents of the 50 States, do not receive the SSI), and the island actually receives less than 15% of the Medicaid funding it would normally receive if it were a state . However, Medicare providers receive less - than - full state - like reimbursements for services rendered to beneficiaries in Puerto Rico even though the latter paid fully into the system In general, "many federal social welfare programs have been extended to Puerto Rican (sic) residents, although usually with caps inferior to those allocated to the states ." A common misconception is that the import / export taxes collected by the U.S. on products manufactured in Puerto Rico are all returned to the Puerto Rico Treasury . That is not the case, as such import / export taxes are returned only for rum products, and even then, the US Treasury keeps a portion of the taxes . </P> <P> The main body of domestic statutory tax law in Puerto Rico is the Internal Revenue Code of Puerto Rico (Spanish: Código de Rentas Internas de Puerto Rico). The code organizes commonwealth laws covering commonwealth income tax, payroll taxes, gift taxes, estate taxes and statutory excise taxes . </P> <P> On July 4, 2006, the government approved Law Number 117, The 2006 Contributive Justice Law, establishing a tax with a 5.5% rate at state level and an optional 1.5% rate at municipal level . The tax went into effect on November 15, 2006 . The tax is better known as the Sales and Use Tax' (Impuesto sobre Ventas y Uso), often referred to by its Spanish acronym "IVU". The law amended Article B of the Code and created subarticle BB . On July 29, 2007, the government approved Law Number 80, making the tax mandatory for all municipalities of the island . Also, the tax rates changed to 6% at the state level and 1% at the municipal level . </P> <P> The tax originated in some municipalities (Caguas, Yauco and Villalba) in 2005 . Seeing the economic success of these municipalities, many other municipalities enacted sales tax ordinances, usually by copying the ordinance of Caguas . By the middle of 2006, more than 30 municipalities had enacted sales and uses taxes on the island . During the second and third quarters of 2006, the Commonwealth of Puerto Rico suffered several political struggles in its Legislative Assembly . They were largely caused of the budget deficit of the government and the refusal of the Legislative Assembly to approve the taxes proposed by the Governor of the Island . Government offices were shut down until the Assembly approved Law 117, which included the first sales tax of that possession of the United States . </P>

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