Puerto Rico receives less in federal benefits than the states. Needy residents get less nutrition assistance, Medicaid, and Medicare resources than they would if they lived in a state. The territory gets less support even in disasters, and much less in government grants and infrastructure support. One of the excuses given for this is that Puerto Rico’s workers don’t pay federal income tax.
Puerto Ricans don’t pay federal income tax
It is true that most residents of Puerto Rico are not required to file federal income tax returns. Section 933 of the tax code says that residents of Puerto Rico do not have to pay federal tax on income derived from “sources within Puerto Rico (except amounts received for services performed as an employee of the United States or any agency thereof)[.]” Section 933 is the current version of Public Law 81-814 (64 Stat. 906), originally passed in 1950.
The reason behind this law was a concern that the new territorial government would need to collect taxes, and that the residents of Puerto Rico might be unable to afford both local taxes and federal taxes. Congress decided to forego collecting federal income tax from Puerto Rico.
Puerto Ricans pay other federal taxes
Workers in Puerto Rico pay Social Security taxes, self-employment taxes, and more. IRS figures for 2023 show that Puerto Rico paid $5,140,301, compared with Vermont’s $5,660,731. Vermont has a smaller population than Puerto Rico, but Vermont gets the full measure of federal benefits, too, while Puerto Rico does not. It is simply not true that Puerto Ricans do not pay any federal taxes.
Federal dependence
Espacios Abiertos recently reported that Puerto Rico does receive more federal expenditures than it pays in federal taxes, but so do half of the states, such as: Michigan, Idaho, Louisiana, Oklahoma, Oregon, Montana, Hawaii, Vermont, Maryland, Pennsylvania, Maine, Wisconsin, Alabama, Arizona, Mississippi, West Virginia, Virginia, New Mexico.
Moreover, seven states have a greater deficit in net federal expenditures per capita than Puerto Rico. These are: Connecticut, Indiana, South Carolina, Alaska, Minnesota, Kentucky and North Dakota.
MoneyGeek has found that New Mexico receives $3.42 in federal funds for each $1.00 residents pay into the federal coffers. West Virginia, Alaska, and Mississippi all get close to $3.00 for every $1.00 they contribute.
The point here is not that states and territories should be profit centers for the federal government. Rather, the federal government collects taxes which it then uses to meet the needs of citizens. The funds allotted to states do not depend on and are not affected by the amount of tax revenue they produce for the nation. It can be argued that Puerto Rico should not be held to a different standard.
Federal Taxes Would Benefit More Than Burden Most Puerto Ricans
