A commenter wrote, “The US gets more out of the island in the current status than they would get if it would become a state.” There was no explanation and no evidence offered, so we thought we’d check the statement and find out. Just what does the U.S. get from Puerto Rico now, and what would the nation get from a state of Puerto Rico?
What does the U.S. get from Puerto Rico?
Historians and economists provide the items on this list as answers to that question:
- Strategic value as a naval station in the Caribbean
- A market for excess production of goods from the states
- An asset for maritime and fishing industries
- A valuable tourist attraction
- More than $4 billion a year in federal taxes
- Cultural enrichment from the arts, cuisine, and other aspects of Puerto Rico’s unique culture
- Scientific research opportunities
- More pharmaceuticals exports than any state
- Exports of medical devices, electronics, textiles, and other goods
- Men and women who serve in the U.S. military in larger percentages than residents of any state
- An educated, bilingual workforce willing to work for U.S. companies
How would statehood change this?
Most of the items on the list would not be affected by statehood at all. As a trading partner, Puerto Rico would continue to be valuable to the states both as a source of goods and as a market for goods. The strategic value would be unchanged or improved. The cultural and scientific opportunities might be more widely appreciated, but would certainly not be less valuable.
Taxation would change. More affluent residents might pay more in taxes, but the average family in Puerto Rico would receive greater benefits without additional taxation. Indeed, a state of Puerto Rico would be more economically stable and would not need to levy such ruinous sales taxes on residents. Most Puerto Ricans would have more buying power and pay less in taxes. Some would pay more. States make their own decisions about their local taxes, so we can’t predict all the changes that could take place, but the U.S. could pay more to Puerto Rico in benefits initially than it currently does and would eventually take in more in individual taxes.
Statehood could end the tax benefits exploited by U.S. companies to wash profits through Puerto Rico. We didn’t list this as a benefit for the U.S., because it actually allows U.S. citizens to shelter their incomes from taxation by the United States. It may have benefits for individuals and corporations, but the end of this situation would benefit the United States as a whole. This could be a significant benefit to the United States. While some companies might leave Puerto Rico if they lost tax shelters, overall investment should increase with the stability of statehood.
At the same time, Puerto Rico can expect to become more prosperous, as has every territory which has already become a state. With higher incomes and better prospects, Puerto Rico would probably cost the United States less and provide more to the federal coffers in the long run. We have seen that quite a few states take more from the federal government than they pay in, just as the territory of Puerto Rico currently does, but that might not continue to be true for Puerto Rico. Given a level playing field, we expect that Puerto Rico will do well.
As a state, Puerto Rico will be eligible for more federal funding, which could be used to invest in infrastructure, education, and healthcare. This could boost the island’s economy. Statehood could make it easier for businesses to invest and trade. This, too, could lead to increased job opportunities and economic growth. And of course, as a state, Puerto Rico would have two senators and a representative in Congress, giving its residents a stronger voice in federal policymaking. This could lead to policies that benefit Puerto Rico’s economy.
32 territories have already become states. All of them are more prosperous as states than they were as territories. Usually, this took place quickly following statehood. Statehood would benefit the nation as a whole, as well as benefiting the people of Puerto Rico. Reach out to your elected representatives and let them know that you, like the majority of Americans, favor statehood for Puerto Rico.
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