The Institute Advocates for the Extension of Tax Credits as a Poverty Reduction Tool for Working Families

The Youth Development Institute (Instituto del Desarrollo de la Juventud) recognizes the that potential tax credits have to increase the economic security of families that continue to live at or near the poverty level, even if they are working families. According to Kids Count data, nearly 1 in 3 working families in the island live at or near the poverty level. For this reason, we are promoting the extension of tax credits as a poverty reduction tool for working families where the family unit includes children under 18.

Tax credits are benefits received by working families once they submit their taxes; it may be a reduction in the taxes paid or a tax refund. These credits can help increase participation in the job market and reduce poverty; those who receive them use them to pay debt, open savings accounts and for activities that promote economic mobility. Therefore, when people start to work, they are able to progress; this in turn leads them to economic self-sufficiency.

Many experts in Puerto Rico and the mainland United States have highlighted the critical need to increase participation in the island’s work force, which is currently at 39%. In this context, tax credits would represent an incentive for people to stay in the work force.

The earned income tax credit (EITC), which is paid to families that continue to work, would bring great relief for working families with children. For example, if a single mother with two children earns an annual income of $19,000, she would be eligible for a $1,200 refund when she submits her taxes. This would bring this family over the poverty level of $19,337 for this household composition.

On the other hand, it is also important to extend the Child Tax Credit (CTC) to families with one or two children in Puerto Rico. Currently, only families with three or more children are eligible to receive it. However, only 12% of families with children in Puerto Rico have more than three minors. Consequently, if the benefit is extended with one or two children, 355,000 additional families would receive an average credit of $1,500 per year. This would bring an additional $270 million into the economy each year.

Additionally, this matter has bipartisan support in Congress and has been included in nine proposed legislations. A total of 53 congresspeople have co-sponsored these bills, however, they have usually been proposed by only one party and this has hindered approval. For this reason, it is essential that leaders in the diaspora and in Puerto Rico focus on this as a high priority matter.

As part of the campaign in the following link bit.ly/PRchildtax Puerto Ricans in the diaspora were encouraged to contact their congresspeople and ask them to support this initiative. It has bipartisan support, as well as the specific support of Congresswoman Jenniffer Gonzalez, Republican Senators Orrin Hatch and Marco Rubio, Democratic Senator Robert Menendez, and Democratic Representative Nydia Velazquez, who is of Puerto Rican descent.

Over 50 civil society organizations in Puerto Rico and in the diaspora have signed and endorsed a petition letter the IDJ will deliver to Congress. More than 50 individuals have also filled out the electronic form to submit a petition to their congressperson. In the petitions, these individuals state their support of the CTC extension for families in Puerto Rico.

The CTC is definitely a powerful tool in the fight against child poverty, especially if we keep in mind that, in 2017, 57.8% of children in Puerto Rico lived under the poverty level and 38.5 percent in extreme poverty.

In order to visualize the situation more clearly, it is important to highlight that in 2016, 2.7 million people, including 1.5 children, were able to rise out of poverty in the United States thanks to the CTC. At the same time, poverty conditions were mitigated for another 12.3 million people, including 6.1 million children, thanks to the CTC.

However, we recognize that tax credits alone will not solve the stark child poverty problem in Puerto Rico. It would be irresponsible to make such a claim. There is a need for public policy that considers the obstacles faced by parents when entering the work force, the benefit eligibility regulations that hinder the transition to employment and the fragmentation of benefits. However, there is no doubt that this is an initial step in the right direction when it comes to promoting economic security improvements for families with children.

If you would like to join the public policy efforts led by the IDJ, please contact us at brayan.rosa@juventudpr.org and we will add you to our mailing list.