Espacios Abiertos estimates that around 125,000 people or 54,920 families or taxpayers units could cross the poverty line in Puerto Rico. These estimates are done by incorporating the parameters of the redesigned work credit (Earned Income Tax Credit, local EITC) to the filed returns for the tax year 2019.
EA’s policy brief “The New Earned Income Tax Credit and its Impact on Poverty in Puerto Rico”, indicates that the local EITC has the potential to help around 420,683 people (216,393 taxpayers units) increase their levels of economic security, since in addition to the 54,920 taxpayers who would cross the poverty line, another 161,473 taxpayers would have the possibility of being less poor in economic terms.
Although there is still a long way to go to encourage formal work with decent wages in Puerto Rico, the credit—coupled with the increase in the minimum wage—points in the right direction. Espacios Abiertos will continue to evaluate the effectiveness of the new credit for work with the purpose of providing empirical evidence on its real impact on the living conditions of thousands of Puerto Rican families.
The potential increase in the number of taxpayers who could benefit from the new credit is due to three factors: the inclusion of young people between 19 and 26 years old (76,426 taxpayers), the entry of self-employed workers (13,238 taxpayers) and the expansion of the taxpayer base by increasing the maximum income limit of applicants for the new credit according to the new law (121,885 taxpayers) who did not qualify in 2019.
If we apply the parameters of the new credit that will be in effect in 2022, to the returns that were filed in the 2019 tax year, 211,549 taxpayers (349,152 people) could receive the credit in addition to the 254,757 taxpayers (496,149 people) who qualified in 2019, impacting in total a potential 466,306 taxpayer units (845,301 people) in Puerto Rico.
Using the demographic and socioeconomic composition of the 2019 taxpayer units, the credit could average approximately $1,800 per taxpayer.
Access the full report and executive summary through the following links:
- Download the public policy paper “The New Earned Income Tax Credit and its Impact on Poverty in Puerto Rico“ (2021)
- Download the executive summary “The New Earned Income Tax Credit and its Impact on Poverty in Puerto Rico“ (2021)
- Descarga el informe de política pública “El nuevo crédito por trabajo y su impacto en la pobreza en Puerto Rico” (2021)
- Descarga el resumen ejecutivo “El nuevo crédito por trabajo y su impacto en la pobreza en Puerto Rico” (2021)