It's been sunny almost every day with a cool ocean breeze, and temperatures in the 70s and 80s. Sure beats the freezing cold and snowy weather we came from in Vermont. Our big workout down here is taking a swim in the pool or the ocean versus digging out of huge snow piles back in New England. But it wasn't just the sunny skies, year-round warm weather, and beautiful ocean beaches that drew us to Puerto Rico; it was the incredible tax breaks that are available here that are not available anywhere else in the world for would-be former US residents. – International Man

Dominant Social Theme: Puerto Rico … issuing the kind of tax breaks that Uncle Sam can tolerate.

Free-Market Analysis: Puerto Rico is hot – not weather-wise but as a business destination. And perhaps there's a reason. Uncle Sam is well aware that many are doing their best to move their money and themselves out of the US; But if the funds have to go anywhere, US bureaucrats presumably would rather have them go to a protectorate like Puerto Rico than a country more emphatically outside of US influence.

The difference in emphasis can be seen in the way the US is treating St. Kitts-Nevis versus Puerto Rico. As was just recently reported, the US Financial Crimes Enforcement Network's (FinCEN) has released new guidance "warning US banks against working with individuals holding passports from St. Kitts-Nevis."

Now, it's true that St. Kitts' attraction is somewhat different than Puerto Rico's in that St. Kitts offers what is called "citizenship-by-investment." But nonetheless, some of the reasons end up being the same. People who want a second passport often also want to do business outside of the US mainland as part of an effort to escape the growing threat of US worldwide taxation.

It would seem Uncle Sam is willing to tolerate Puerto Rico's attempts to make itself over as a kind of tax haven because it still resides within the sphere of US influence. So maybe – just maybe – Puerto Rico is a top alternative right now for people who have tax minimization as their main priority.

If so, that may be because of two relatively recent laws … Act 20 and Act 22. The laws are basically aimed at wealthy people and tempts businesses to relocate by offering a flat 4% on earnings and a 100% tax exemption on dividends or distributions from export services.

MarketWatch recently covered the explosion of interest in Puerto Rico. Here's an excerpt:

John Paulson is expected to expand his investment in Puerto Rico to $1 billion by the end of next year, as the hedge fund titan leads a growing brigade of wealthy U.S. business owners who are taking advantage of the languishing island's efforts to transform itself into a tax haven.

The Paulson & Co. founder, estimated to be worth $11 billion, is headlining an invitation-only summit in San Juan, Puerto Rico, on Thursday to discuss two new tax laws that provide generous dividend and capital gains tax breaks for individuals willing to relocate their businesses to the tropical island, according to Puerto Rico officials.

For their part, the commonwealth's political leaders are hoping the tax-breaks will attract businesses that can help jump-start Puerto Rico's ailing economy, which is suffering from high unemployment rates and a declining population.

The tiny island is grappling with a debt burden of roughly $70 billion, and many municipal credit analysts see a broader economic revival in Puerto Rico as key to making good on that debt. Paulson has already invested $260 million this year to create two high-end luxury resorts in San Juan's Condado district. That follows investments last year in the St. Regis Bahia Beach Resort and the Bahia Beach Resort & Gold Club.

The government expects Paulson to invest a total of $1 billion in Puerto Rico by 2015. Paulson's firm had no comment. "Get on a plane now, and business class is filled with representatives from Blackstone, Goldman, DE Shaw, and every private equity firm I know," said Nicholas Prouty, president of Putnam Bridge on the new interest in Puerto Rico from Wall Street's elite.

Putnam Bridge Investments is expected to invest $200 million in Puerto Rico this year, according to the government. A LOW-COST BASE "What we are trying to achieve here is a second transformation with the Puerto Rico economy," said Alberto Baco, the Puerto Rican secretary of economic development and commerce.

More than 150 companies are already looking to move their offices to Puerto Rico to take advantage of the new tax laws, and the government is expecting more than 300 applicants this year. Officials are expecting the move to create 90,000 jobs by 2016 and to add up to $7 billion to the island's GDP.

"The cost of doing business is low, the cost of hiring local labor is lower," said Peter Schiff, owner of Euro Pacific Asset Management ."And if I need to move employees form the mainland it's easier, I don't have to worry about visa issues." Schiff recently relocated his firm from California to Puerto Rico and is establishing his main office in the capital, San Juan.

Alex Daley of Casey Research has also moved to Puerto Rico because of the tax advantages that he described in a Casey report entitled, "Puerto Rico's New Tax Advantages"

Here's an excerpt:

According to Bloomberg, "The marginal tax rate for affluent New Yorkers can exceed 50 percent on ordinary income." By relocating to Puerto Rico, enormous tax savings can be achieved. For certain investors, that could mean eliminating taxation completely. For the right businesses, it could mean tax rates of just 4% on earnings. Anyone who relocates to Puerto Rico can apply for the tax shelter of Acts 22 and 20—including mainland US citizens, who cannot find similar benefits anywhere else in the world without significant complication and expense.

Now, I know it sounds too good to be true. But I've done a comprehensive boots-on-the-ground investigation and found that the tax advantages are real, and that for many Americans they are a huge opportunity that could truly be life-changing.

Because, until now, there was no easy, legal way to escape US taxes… besides death or renouncing your US citizenship. That's because the US is the only country in the world that effectively taxes its citizens and former residents no matter where they live and make their money.

Sure, there are plenty of low-tax countries in the world. Singapore, the Cayman Islands, and Dubai come to mind—and chances are you've heard of them all for that reason. These little countries have turned into financial and services meccas because any Londoner or Parisian or Canadian could head there and run a business or manage their investments in a much more tax-friendly climate. America, not so much.

While they do allow a small exemption for a minimal amount of income, with lots of rules, generally Americans are taxed no matter where they go. Especially the successful ones. Many believe it's these suffocating and unfavorable tax policies plaguing US citizens that are responsible for the record number of Americans saying goodbye permanently to Uncle Sam by renouncing their citizenship and heading to places like Singapore.

In fact, Forbes is reporting that the number of US citizens and permanent residents who gave up their citizenship soared 221% last year alone. That's what Facebook cofounder Eduardo Savarin did when he headed for Singapore. But the penalty for giving up your citizenship is high if you're wealthy—thanks to the enormous US exit tax. The US worries about this trend, of course.

Jurisdictions like Puerto Rico want in on it to boost their own economies, like Hong Kong or Macau or Belize have. Because of those dual forces, there is now a much easier way to seek less-taxed shores, one of which is rooted in decades of US law and support and unlikely to change on a whim. That's where Puerto Rico shines brightly above all others… By becoming a bona fide resident of Puerto Rico, you can escape paying high US taxes legally, still retain your American citizenship, and avoid paying the hefty exit tax.

Casey offers a downloadable PDF guidebook, "Puerto Rico's Stunning New Tax Advantages," to further explain the Puerto Rico program.

There are downsides to the Puerto Rican opportunity, as there are to almost everything in life. The tax breaks have made Senators like Harry Reid and other Democrats grumpy. According to reports, John Buckley, a former tax counsel for the Democratic Party on the United States House Committee on Ways and Means, believes that Puerto Rico is on its way to becoming a bona fide tax haven.

And yet … The chances are that nothing drastic is going to be done to affect Puerto Rican benefits. For Democrats, the prospect of interfering with the island's attempts to achieve fiscal solvency is probably a lose-lose proposition. As a practical matter, they probably wouldn't be able to stop the protectorate from continuing to offer tax breaks. Then there's the ill will that would be generated by such an attempt within the Hispanic community: It would probably have a significant, negative impact on the Democrats' political base.

There's a third, even more sensitive reason, however, and that's the probable cooperation between Puerto Rican banking and US authorities. Given upcoming efforts by the US to leverage tax information on citizens around the world, there's probably no doubt that the IRS and others would rather have big business relocating to Puerto Rico than, say … Singapore.

For all these reasons, Puerto Rico is likely to continue to offer tempting tax breaks without much political interference. And as we mentioned at the beginning of the article, that will likely make it "the tax haven that Uncle Sam tolerates" – at least for the foreseeable future.