If the politics of Puerto Rico’s new status was ambiguous, the economics was clear. A loophole in the tax code exempted corporations from federal taxes if they were based primarily in the territories. It was one of the many legal anomalies resulting from the Insular Cases, which had denied the automatic extension of federal law to the unincorporated territories. Latching onto it, Muñoz Marín’s government turned Puerto Rico into a tax haven. Mainland corporations were enticed to move to the island with tax holidays, subsidies from the insular treasury, low-interest loans, and other aid. The
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