The Hollander Act: Imposing the U.S. Tax System on Puerto Rico (1901)

In 1901, the colonial government of Puerto Rico enacted a sweeping tax reform designed by Jacob H. Hollander, a Johns Hopkins University economist appointed as Treasurer of Puerto Rico under the Foraker Act. The Hollander Act replaced the complex Spanish tax system — which included the contribución territorial, municipal taxes, and various commercial levies — with a simplified property tax modeled on American systems.

The new system imposed a uniform 1% tax on the assessed value of all real property. While seemingly equitable on its surface, the act had profoundly unequal effects. Small coffee farmers in the mountainous interior, already devastated by Hurricane San Ciriaco in 1899, faced property tax bills they could not pay. The cash-based tax system replaced the more flexible arrangements of the Spanish era, where taxes were often collected in kind or deferred during poor harvests.

Meanwhile, large sugar corporations — many newly arrived from the U.S. mainland — benefited from the rationalized system. They had access to credit, dollar-denominated capital, and the legal infrastructure to manage tax obligations. The result was a massive transfer of land from Puerto Rican smallholders to American corporations. Between 1899 and 1930, four major U.S. sugar companies came to control vast tracts of coastal plains: Central Aguirre Associates, South Porto Rico Sugar Company, Fajardo Sugar Company, and United Porto Rico Sugar Company.

Hollander himself acknowledged that the property tax would be regressive in its effects but argued it was necessary to modernize Puerto Rico's fiscal system. Critics then and since have argued that the tax reform was designed not to benefit Puerto Ricans but to create conditions favorable to American capital investment.

The Hollander Act was one of several early colonial measures — along with the currency devaluation of 1899 and the Foraker Act's trade restrictions — that systematically restructured Puerto Rico's economy to serve metropolitan interests. Together, these policies transformed an island of small landholders and diverse agriculture into a monoculture plantation economy dominated by absentee corporate ownership.