Stronger Working-Family Tax Credits Can Help Puerto Rico Bounce Back

Several bills in Congress, including the Economic Mobility Act that the House Ways and Means Committee approved last summer and the earthquake disaster package that the House passed last week, would give a significant boost to Puerto Rico’s low- and moderate-income families by strengthening the Commonwealth’s Earned Income Tax Credit (EITC) and the federal Child Tax Credit as it applies to Puerto Rico residents. Those changes would provide important help to Puerto Rico in navigating a complicated recovery process that involves much more than natural disasters.

January’s earthquake and its ongoing aftershocks follow nearly 15 years of economic recession, the largest municipal bankruptcy in American history, and two of the most powerful hurricanes ever to cross the Atlantic. Recovering from these events is a massive challenge for the Commonwealth. Moreover, Puerto Rico’s poverty rates of 58 percent for children and 43 percent for its population as a whole far exceed the overall U.S. figures. And Puerto Rico is hemorrhaging residents, further weakening its economy; more than half a million residents have left in the last ten years.

That’s why Puerto Rico needs not just emergency disaster assistance, but also a longer-term federal recovery package to stabilize and revive its economy, including measures to strengthen its EITC and Child Tax Credit.

Puerto Rico, whose residents generally aren’t eligible for the federal EITC, created its own EITC in 2019, but it lacks the funds to make its EITC strong enough to address its widespread poverty and low labor-force participation. Providing federal support to expand Puerto Rico’s EITC should prove helpful and effective. The federal EITC has an impressive track record over nearly half a century of rewarding work and reducing poverty.

Federal policymakers should also erase a longstanding disparity in the Child Tax Credit that prevents Puerto Rico’s families from claiming the credit if they have fewer than three children — an arbitrary limit that excludes large numbers of struggling working families. Moreover, Puerto Rico’s families that do qualify generally get a smaller credit than similar families on the mainland.

Beyond the EITC and Child Tax Credit, the federal government can do much more. Puerto Rico’s restricted access to other basic federal assistance programs compounds its economic hardships. For both Medicaid and the Nutrition Assistance Program — Puerto Rico’s version of SNAP (food stamps) — the Commonwealth receives only fixed block-grant funding each year that falls short of meeting the needs of the more than 1 million residents enrolled in each program. By giving Puerto Rico full access to these programs, policymakers could create long-overdue equity for Puerto Rico’s 3.2 million residents, who are U.S. citizens.