Access the full report (English version) authored by Policy Analyst Wilmarí de Jesús Alvarez, through this link. View other links to related documents at the bottom of the page.
Excerpt from the Report: Recommendations
Accountability and monitoring of the return on investment
- The Puerto Rico Department of the Treasury should use the methodology specified in ARPA and the requirements specified in Law No. 41 of 2021 to quantify and report on the amount the public coffers reimburse in EITC and thereby resolve the confusion caused by the lack of uniformity in indistinctly reporting the amount disbursed and amount claimed.
- In order to ensure that any detail(s) in the next tax cycle can be rectified and, if necessary, amendment(s) may be made to the Puerto Rico income tax code with respect to the EITC, the local Treasury Department should publish an annual report on the impact of this measure before the close of the current legislative session or the beginning of the next tax cycle.
- The figures still to be reported by the Department of the Treasury are essential for confirming whether there was an excess disbursement of one hundred percent of the amount budgeted by the government of Puerto Rico. If this was the case, there must unquestionably be modifications to the controls established by the Department. In addition, and from the most favorable angle, this situation could suggest that Puerto Rico has the ability to budget up to an additional $200 million for the EITC, that is, $400 million per year, to incentivize formal work and relieve the financial insecurity of thousand of working families who earn less than $42,000 per year.
- Need to carry out a qualitative analysis, through public policy laboratories, collaborations with academia, and surveys of participants in the EITC, which will allow measurement of the effectiveness of the EITC in improving the poverty rate among families and increasing the labor participation rate.
Expansion of impact and improvement in efficiency
- Ensure that every household that files a tax return with the Department of the Treasury and is eligible for one, the other, or both credits (EITC and CTC) but does not apply, be notified of its eligibility and that in the case of the EITC (since it is locally designed and implemented), that credit be accredited or reimbursed automatically.
- Double the annual assignment of EITC moneys in the budget of Puerto Rico (to $400 million), with the federal government’s commitment to do the same (that is, assign up to $1.2 billion) in order to combat poverty, while at the same time incentivizing formal work and reducing the abysmal difference between the poverty rate in Puerto Rico and that rate in the poorest jurisdictions in the United States.
- Evaluate mechanisms that will allow, in collaboration with the IRS and within the existing legal and judicial order, the processing of the CTC by the Department of the Treasury from now on, in order to ensure agile disbursement of the credit for the universe of households that now file with the local government, as well as other families eligible locally for that credit.
Related links: