U.S. Reps. Pascrell, González introduce revised bill to provide supplement to Puerto Rico EITC
Island’s fiscal board urges approval
SAN JUAN — Puerto Rico’s Financial Oversight and Management Board said it was pleased to see new proposals in the U.S. Congress that would provide funding to enable Puerto Rico to expand its newly reinstated Earned Income Tax Credit (EITC).
U.S. Rep. Bill Pascrell Jr. (D-NJ), a member of the House Ways and Means Committee, and Resident Commissioner Jenniffer González (R-PR) announced in a statement that they introduced H.R. 3307, a revised version of the Tax Equity and Prosperity for Puerto Rican Families Act of 2019, to provide a federal supplement to Puerto Rico’s EITC program, as well as funding for EITC education and outreach to the island. In addition, the legislation would provide a similar supplement to the other U.S. territories.
The legislation is part of a package of bills scheduled for consideration Thursday by the committee.
“Unlike Americans in every other state, working Puerto Rican taxpayers are excluded from accessing the federal EITC to supplement their incomes. This unfair restriction has tied the commonwealth’s hands at the worst possible time as islanders are recovering from disaster and facing high unemployment and unacceptable levels of poverty, ” said Pascrell, who first introduced legislation to provide an earned-income tax credit for residents of Puerto Rico in 2007.
González said the EITC helps low- and moderate-income working individuals by providing “substantial support” to help alleviate financial burdens while encouraging work.
“Currently, the EITC is unavailable to Americans living in Puerto Rico and other territories, including members of the military, federal employees, and those who pay Federal taxes. Together with the infusion of funds and the greater engagement by a productive workforce would make a major contribution towards transforming the Island’s economy out of relative stagnation towards a healthy and steady growth path.” González said.
The proposal the committee will consider would also make the Child Tax Credit (CTC) available to families in Puerto Rico with one or two children, addressing a “longstanding disparity in the CTC for families in Puerto Rico,” reads Pascrell’s release. “Currently, families on the island must have three or more children to qualify, and those who do qualify generally get a smaller credit than families on the mainland.”
The bill would also provide funding for families in Puerto Rico to receive CTC benefits on the same basis as families stateside.
“The Board supports these changes to the CTC for Puerto Rico, given the high child poverty rate on the Island as compared to the mainland. Both the Congressional Task Force on Economic Growth in Puerto Rico’s Report issued in 2016 and the Oversight Board’s 2018 Annual Report support the extension of the CTC to families in Puerto Rico with one or two children,” the board said in a statement.
A larger EITC would provide a greater incentive to bring more workers into the island’s formal labor market.
The board’s fiscal plan for Puerto Rico says the island’s labor force participation rate is only 41%, “far from the U.S. average (62%) and even the lowest-ranked U.S. state (West Virginia, 54%), and well below other Caribbean islands. In fact, according to World Bank data, Puerto Rico’s formal labor force participation rate is currently the 7th lowest in the world and has not ranked higher than the bottom 20 in at least the last thirty years.”
Puerto Rico’s youth unemployment rate is 25.8%, more than double the world average (12.8%) and far higher than in the states.
“Low labor force participation in Puerto Rico is a function of neither Hurricane Maria nor the economic downturn that began in 2006; rather, low rates of employment are a long-term structural problem that need to be addressed through significant changes in public policy,” the board said.
From 2006 to 2014, Puerto Rico had a Worker’s Tax Credit, but its design “failed to encourage formal employment,” the board said, adding that, at its “urging, the local government enacted a new EITC that took effect this year and is better designed to incentivize workers to participate” in the formal economy. Yet the new credit is still relatively small and thus will likely have only a modest impact.”
The EITC has increased employment among single women with children stateside and removed millions of children from poverty. Research shows it also is linked to improvements in children’s health and educational attainment, and suggests increases in their employment prospects in adulthood.
“The EITC in Puerto Rico needs to be sufficiently strong to play a comparable role on the Island. The Board urges the Committee to approve and advance legislation to provide this needed support for the EITC and CTC in Puerto Rico,” its statement reads.