|Editor’s note: Doug Casey sees no way around The Greater Depression. As he noted yesterday, Doug believes that beyond corruption, senseless wars, and “idiotic” foreign policy, America is well on its way to becoming a police state. And our biggest risk today is not market risk… it’s political risk. So to get out of harm’s way, he moved to rural Argentina. His colleague Louis James also wanted to protect his family and money from the crisis facing America. So he moved to what is rapidly becoming the only tax haven that matters for U.S. taxpayers: Puerto Rico. In today’s edition of our weekend Masters Series – published April 14 in Casey Research’s free e-letter The Daily Dispatch – Louis explains the huge tax benefits of living in Puerto Rico and his vastly improved quality of life. If you can’t expatriate like Doug did, Louis says Puerto Rico is one of the best places to ride out the potential Meltdown of America.How I Intend to Survive the Meltdown of America By Louis James, Chief Metals & Mining Investment Strategist, Casey Research As I type here in my new home office, I glance up and see waves of Caribbean blue crashing on the palm-lined beach. Surfers are out in force. Scattered clouds add to the already amazing variety of colors in the ocean. I wonder if I will have time to go for a swim before dinner. And I’m amazed yet again to think that it was a shot at lower taxes that brought me here to Puerto Rico. It seems almost unnatural for me to be able to enjoy so much beauty while saving money, but that’s exactly what I’m doing…The view from my new home office You see, the economy here never really recovered from the crash of 2008. This is very bad news for long-suffering Puerto Ricans trying to make ends meet. When I first came here with my wife to check the place out, locals kept asking us why we were thinking of moving here. Jobs are scarce, and something of an exodus is taking place in the opposite direction. (Puerto Ricans are U.S. citizens and can travel and work freely anywhere in the U.S.) But I wasn’t coming to Puerto Rico to sell hot dogs. My income doesn’t depend on the local economy, so its woes are an obvious opportunity for a contrarian speculator like me. Take the most simple and basic asset class one can invest in as a Puerto Rico play: real estate. The market has been so devastated that million-dollar condos are selling for half price. When we closed on our new place, the seller came up short, and we had other options, so we weren’t willing to pay more. The real estate agents involved were so eager to keep the deal from falling through, they kicked in with their own money to help the seller out. Personally, I’m not a big fan of gated communities. But for people who are concerned about possible social unrest in the future, it’s good to know that you can buy properties in some of the most posh and secure communities on the island with no money down. Now, as much as I like a contrarian bargain – and as much as my wife loves the tropical weather – what really brought us here were the new tax incentives the government of Puerto Rico enacted to make the island more attractive to investors and employers. The critical point here is that Puerto Ricans are exempt from U.S. federal income taxes, even though they are U.S. citizens. They pay Puerto Rican taxes, of course. And those have generally been similar to U.S. taxes… So the island has never been seen as a tax haven before. That all changed in 2012, when Puerto Rico passed Acts 20 and 22. Act 22 Act 22 is basically a 100%-capital-gains tax holiday designed to attract investors to come live in Puerto Rico. Exactly what is included or excluded is beyond the scope of this article. But for me, the important thing is that it covers the stocks I already owned when I moved here on January 1, 2014. Given that the market bottomed at almost the same time, I have no gains to be taxed on for 2013… And I will not be taxed for the gains I make going forward – all the way to 2036. This alone was worth the move to Puerto Rico, in my opinion. Happily, the application process was simple. My wife downloaded the form and filled it out. I signed it. And a couple weeks later, we got an official tax-holiday decree in the mail – no questions asked. I had to accept the conditions of the decree in front of a notary and send in an acceptance form with a $50 filing fee, and that was it. Didn’t even have to hire a lawyer. This tax break is not available to current residents of Puerto Rico – it’s designed to attract wealthy people to come live on the island, after all – but it’s available to all others who move here, including but not limited to U.S. taxpayers. Act 20 Act 20 is a tax break on corporate earnings designed to incent job creation in Puerto Rico. The idea is to persuade U.S. employers who might set up call centers in India or create other similar jobs abroad to do so closer to home, by offering them a 4% corporate-earnings tax rate. My fellow Casey Research editor Alex Daley has moved to Puerto Rico as well. We’ve formed a company here that exports writing and analytical services to Casey Research in Vermont. This is the basis of our application for Act 20 tax benefits, which has not been approved yet, but which we understand is close. If we get our Act 20 decree approved, we’ll still have to pay regular income taxes on our base salaries, but the lower tax rate applied to our corporate income will result in a drastically lower total income tax rate for us as individuals. All 100% Legal The beauty of this is that Puerto Rico’s tax breaks are not shady tax dodges set up by entities of questionable legality or trustworthiness, but perfectly legal tax incentives within the U.S. Act 20 and Act 22 benefits are available to non-U.S. persons. But they are especially important to U.S. taxpayers because, unlike almost every other country in the world, the U.S. taxes its serfs citizens, whether they live in the U.S. or abroad. In other words, a Canadian can get out of paying Canadian income taxes by moving out of Canada. A U.S. person cannot escape U.S. taxes by moving to Argentina, or anywhere else – anywhere besides Puerto Rico. It’s like expatriation without having to leave the U.S., truly a unique situation. And it’s a win-win situation. People like us bring much-needed money, ideas, and energy to the island, while getting to keep more of what our crisis-investing strategy nets us. We create jobs rather than take them. We are part of the solution here, and we’ve been made very welcome. Is It Safe? So that’s why I’m here. Whether or not my Act 20 status gets approved, I’m so happy about my Act 22 decree that I’m convinced we did the right thing moving here. When I tell people what I’ve done and why, most get immediately excited by the idea – and then they balk. The first question they ask is usually: What about crime? Puerto Rico isn’t a large island. And a good chunk of its three million inhabitants are clustered in and around the capital city of San Juan. Of course there is crime here, as there is in any large city. There are places I would not walk alone at night – just as there are in New York City. Mexico City, Buenos Aires, La Paz… the capital of any other Latin American country or Caribbean country I’ve been to is much larger, more polluted, and more dangerous than San Juan. In my subjective view, San Juan, with its old Spanish fortifications and amazing beaches, is more beautiful. And you can drink the water here. Sure, it might be cleaner and safer in Palm Beach, Florida – but it’s a lot more expensive there, it has less charm, and there’s no Act 20 or Act 22. It’s a matter of priorities. When I say this, most people remain skeptical. They read about the economic problems Puerto Rico has and the financial trouble the government is in, and they wonder if things could get worse. Of course they can – but if Doug is right about The Greater Depression about to envelop the whole world, things are going to get worse everywhere. Here at least, people are already used to massive unemployment. It won’t come as a shock… It’s never left since 2008. Another way of looking at it is that since tropical storms hit the island from time to time (southern Florida is much more prone to major hurricanes than Puerto Rico, but they do happen), people here are more prepared for disasters than in many other parts of the U.S. The better apartment buildings and hotels have their own electricity generators. Nobody can freeze to death here, anyway, and fruit trees grow all over the island. There’s a lot more I could say. But the bottom line is that I think Puerto Rico is a much better place to ride out a global financial storm than Miami, or Anchorage, or almost any city in between. I Like It Here That last is an important point: If I have to hunker down to ride out an economic storm, it should be in a place where I like being. Puerto Rico is beautiful and bountiful year-round. I speak Spanish, but most people in San Juan are bilingual, so that’s not really an issue. Our new flat is blocks from the best schools, shops, and restaurants in town – and even the hospital. I open the window and the fresh air coming off the ocean carries the sound of waves, sometimes laughing children. There’s more noise pollution during the day. But at night, the city calms down, and we can hear the famous Puerto Rican coquí frogs, which my daughter calls “happy frogs.” Ten floors up, the ocean breeze is cool enough that we have yet to turn on the air conditioning. The beaches are fantastic, and the clear water makes for great diving. I’ve never been a surfer, but the waves here are famous too, so I’m thinking of trying it out. There’s no end of other things to try out, and the neighboring islands have their own charms to offer as well. Granted, my wife and I try to be smart about what we do and where we go, but we’ve never felt unsafe here – well, apart from the crazy drivers. We like it here. We’re happy. For tax reasons, for quality of life, and with the potential meltdown of America in mind, we’re glad we made the move. Regards, Louis James Editor’s note: Doug and his team at Casey Research say much of the Meltdown of America revolves around the U.S. dollar potentially losing its status as the world’s reserve currency. They predict high levels of inflation… the destruction of the middle class… and continually growing debts. Learn more about the looming crisis, what it means for the country, and how Doug recommends protecting your family and your wealth by clicking here.