Access Espacios Abiertos‘ most recent report/policy brief on Puerto Rico’s Earned Income Tax Credit authored by Daniel Santamaria Ots, Enrique Colón Bacó and José Zavala thru this link. Excerpt below.
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Aware of the great potential that an expanded EITC program could have on addressing Puerto Rico’s persistently high poverty rate and low labor force participation rate, in 2021 the federal government assigned up to $600 million in annual permanent supplemental funds to improve the local EITC program in Puerto Rico. In April 2021, Espacios Abiertos (EA), in collaboration with the Center on Budget and Policy Priorities (CBPP), provided concrete recommendations to the Legislature with the goal of restructuring the EITC10. The redesign of the new credit significantly increased the maximum credits, incorporated future annual inflation increases in the credit, and expanded the program’s eligibility categories.
For the first time, the new credit included families without dependents as full beneficiaries, along with young people between 19 and 26 years of age and self- employed workers. In the 2022 fiscal year, once the changes to the redesigned program were in place, approximately 648,000 families received the benefits of this local EITC with an average credit of $1,731. The local government invested some $486 million and the federal government provided approximately $633 million.
Given this background on the origin and development of the EITC program on the island, this report consists of four sections addressing several issues:
- First, it will evaluate the main measures of the program’s impact: total credit, average credit, number of families requesting the credit, credit by personal status, credit by sex, credit by age, credit by number of dependents, credit by occupation, credit by highest source of income, credit by municipality, gross earned income of credit claimants, and credit participation rate;
- Second, it will analyze the credit’s ability to increase economic security for families receiving the incentive, quantify those that manage to exceed the federal poverty threshold, and assess what we can conclude about the program’s impact on the island’s labor force participation rate.
- Third, it will evaluate Puerto Rico’s access to federal funding for the EITC program and compare Puerto Rico’s local and federal funding of the EITC to that of the 50 U.S. states and Washington, D.C.; and
- Finally, it will conclude with public policy recommendations.