Local Municipal Market Concentration: The Case of Puerto Rico and the Federal Estate Tax

We demonstrate that the federal estate tax imposes a substantial tax burden on the US assets of Puerto Rican estates while local assets are completely sheltered from it. We provide evidence that Puerto Rican estates successfully shelter from the federal estate tax, suggesting that they are concentrated in local assets. We also show that Puerto Rican households held substantial amounts of Puerto Rico’s municipal debt precrisis (i.e., pre-2013), were more concentrated in local municipal debt per dollar of output than households in any US state, and experienced substantial losses during Puerto Rico’s crisis.