[Congressional Record (Bound Edition), Volume 145 (1999), Part 1]
[Extensions of Remarks]
[Page 344]
[From the U.S. Government Publishing Office, www.gpo.gov]



                THE PUERTO RICAN SOURCE TAX FAIRNESS ACT

                                 ______
                                 

                           HON. BILL McCOLLUM

                               of florida

                    in the house of representatives

                       Wednesday, January 6, 1999

  Mr. McCOLLUM. Mr. Speaker, I rise today in support of the Puerto 
Rican Source Tax Fairness Act, a bill to clarify that retirement income 
from pension plans of the government of the Commonwealth of Puerto Rico 
shall be exempt from nonresident taxation in the same manner as state 
pension plans. This may sound complicated, but it is not.
  The 104th Congress passed important legislation banning the so-called 
``source tax.'' The source tax was a state tax placed on pension 
earnings of a nonresident for the portion of the pension that was 
earned while the worker was a resident of a state. If a person lives in 
New York and works for 25 years, builds a pension and then moves to 
Florida, New York had the opportunity to tax that pension income. That 
is no longer the case.
  The issue at the time was one of fairness. This country was born 
under the cry ``no taxation without representation.'' The source tax 
allowed a state to tax a person where he or she had no representation. 
Hence, the 104th Congress took action to remedy the situation.
  Unfortunately, there is a glitch in the law. As written, the law 
prohibits source taxes on governmental retirement plans. However, the 
cross referenced section does not include the government of Puerto Rico 
in its definition. So, Puerto Rico may still tax the governmental 
pensions earned in Puerto Rico even though the person may no longer 
live in Puerto Rico. This could not have been the intent of the law, as 
the other 50 states and the District of Columbia may not tax government 
pensions. It is simply a glitch that is easily remedied.
  As we did the first time, Mr. Speaker, we are again discussing an 
issue of fairness. Why should former state employees around the country 
escape the source tax on their pensions and not the former employees of 
the Commonwealth of Puerto Rico? The answer is that there is no reason 
for it. It is taxation without representation for former employees of 
the Commonwealth of Puerto Rico. A simple sense of fairness dictates 
that we need to make this change in the law to repeal the source tax in 
the way it was meant to be repealed. I urge my colleagues to support 
the Puerto Rican Source Tax Fairness Act.

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