Taxes Pivotal in Puerto Rican Statehood Debate : Commonwealth: Companies on the island would loose a tax break if it becomes the 51st state. But they could lose some of it anyway under the President’s plan.

When 22-year-old Alberto Rivera-Fournier walks into a U.S. bar, he is sometimes asked to produce a visa along with his Puerto Rican driver’s license.

When a woman called the National Press Club in Washington for a copy of a speech that Puerto Rico’s governor had recently given there, she was told: “Call the embassy.”

When a Puerto Rican woman applied for a fast-food job in nearby Alexandria, Va., she was turned away because she didn’t have a green card.

Visa? Embassy? Green card? These are normally not concerns for U.S. citizens. And Puerto Ricans on the Caribbean island and the U.S. mainland have had citizenship since 1917.

But Puerto Rico’s nearly century-old relationship with the United States is once again at a confusing crossroads. For about 50 years, Puerto Ricans have been sharply divided about what status they prefer: full statehood, complete independence or continuation of their now 41-year-old commonwealth.

Last November’s election of a pro-statehood governor and President Clinton’s recent proposal to cut back a lucrative tax break for businesses on the island have raised the stakes in the debate.

A referendum is planned late this year. If statehood wins, Gov. Pedro Rossello will bring the results to the U.S. Congress--along with a plea for immediate deliberations on Puerto Rico’s status.

But polls indicate that Puerto Ricans are about evenly split between the commonwealth and statehood. Independent nationhood, with about 5% of the vote, is not considered an option.

Although Puerto Ricans are U.S. citizens, they cannot vote in presidential elections and do not have to pay federal taxes. Statehood would give them full congressional representation and the right to vote, but it would end tax incentives and require everyone to pay federal taxes.

“It’s an issue of fairness. We’ve participated in wars. We’ve been through all the good and the bad with the United States. Yet we’re not equal,” said Antonio Monroig, an attorney and member of the pro-statehood New Progressive Party.

The statehood party could get a boost from the Clinton Administration’s proposal to tighten Section 936 of the U.S. Tax Code, which exempts the Puerto Rican income of U.S. companies setting up plants there. Under Clinton’s plan, the tax break would be replaced with a less-substantial credit against wages paid on the island.

Section 936 was put in the code years ago to help create jobs for Puerto Ricans. Nearly all top U.S. pharmaceutical companies operate plants on the island, making it a drug-manufacturing center of the world. Opponents of 936 contend that the drug companies, for example, have reaped the tax benefits, but have not provided many local jobs.

Fear of economic catastrophe could edge Puerto Ricans toward the seemingly greater financial security of statehood, said Lawrence Kaagan, president of Kaagan Research Associates, who has conducted opinion polls for the island’s largest newspaper, El Nuevo Dia, since 1983.

“Dangling the prosperity of Puerto Rico in front of the people is a time-honored tradition of the parties,” he said.

Eradication of the tax-exemption code, which would accompany statehood, would be detrimental to Puerto Rico’s economy, said Jose Ortiz Daliot, former head of the Puerto Rican Federal Affairs Administration.

“We might lose some of the advantages we have to attract businesses to Puerto Rico,” he said. About one-third of the island’s jobs are believed to be generated by companies there under the tax code. Puerto Rico’s unemployment rate is about 18%.

Puerto Ricans are just as concerned about statehood’s effect on their Hispanic culture. Closer to Caracas, Venezuela, than to Miami, Puerto Rico has ties to the Latin American world that go back to 1493 when Columbus claimed the island for Spain. The Spanish ceded Puerto Rico to the United States in 1898, after the Spanish American War.

“To Latin Americans, Puerto Ricans tend to be nosotros-- we. To North Americans, we are ‘they,’ ” said Carlos Chardon, director of Puerto Rico’s Small Business Administration.

Latin Americans are ambivalent about Puerto Rican statehood, said Chardon, a statehood advocate. “We’re a little afraid to go into Latin America and explain the basis of the issue,” he said.

Statehooders maintain there is no reason to believe Puerto Rican culture will not survive within the U.S. democratic framework.

“Puerto Rico has been under U.S. control for years. The culture has not been affected so far,” said Michael Veve, an attorney whose great-uncle was a founder of the statehood party. He cites areas in the Southwestern United States where Latin American culture still thrives.

Puerto Rico would be the first Spanish-speaking state admitted to the United States. About 100,000 protesters rallied in the capital of San Juan in January after the governor signed a law making the English language as official as Spanish. More than half of Puerto Rico’s 3.6 million people cannot speak English fluently.

“Some Americans see statehood as this gigantic, brown wave moving in and speaking Spanish,” said Chardon.

But the citizens of Puerto Rico will have the final say, according to President Clinton and many members of Congress. Clinton has indicated that he will support whatever status a clear majority wants.

Reaching that majority could take months--or decades.

“It all depends on when you take the snapshot,” Lawrence Kaagan said. “The reality is there has never been a majority.”

Although divided in opinions, all Puerto Ricans bring the same vehemence to the status debate.

Alberto Rivera-Fournier, a recent college graduate who lives in Washington, said such conviction is simply part of the Puerto Rican psyche. “It’s because we’re not completely defined,” he said. “So we always have this craving for something more.”