“Residents of Puerto Rico pay federal taxes. They did so to the tune of $5 billion in 2023.,” begins a report from Centro at the City University of New York. “They have paid more than $3 billion a year in net contributions to the federal treasury for more than 10 years in a row.” Yet the general belief about Puerto Rico is that the Island gets benefits from the U.S. government for free, and that the lack of federal tax responsibilities makes it acceptable that Puerto Rico receives fewer benefits than the states.
No taxes, no benefits
The Supreme Court argued in the case of Valleo-Madero that “just as not every federal tax extends to residents of Puerto Rico, so too not every federal benefits program extends to residents of Puerto Rico.” The issue was Social Security benefits, which are paid for from payroll taxes deducted from paychecks. These deductions are among the federal taxes Puerto Ricans pay.
The report goes on to share information about Puerto Rico’s contributions to the federal coffers since 1939. We checked the IRS databases for 2023 and saw the most recent figures shared by the IRS:
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Puerto Rico |
Total Internal Revenue collections 5,140,301 |
Business income taxes 67,231 |
Individual income tax and FICA tax 4,013,133 |
Estate tax 18,263 |
This confirms the information shared by Centro. Puerto Rico does indeed pay federal taxes.
And yet the fact that Puerto Rico residents are not required to file for individual income tax is regularly used as the excuse for unequal treatment of Puerto Rico’s residents, including inequity in nutrition assistance, federal healthcare funding, and more.
Getters and givers
The Centro report also points out that common claims that Puerto Rico would be a “welfare state” or that the United States “can’t afford” a state of Puerto Rico because the Island would be a “taker” rather than a “giver” to the federal government. They respond by noting that many states are in the same position. “In fiscal year 2022,” they report, “there were 39 states that received more in federal moneys than they paid to the federal government.” Only 11 states gave more to the federal coffers than they received.
Puerto Rico is in the middle of the states and territories if they are ranked in order of the amount the receive compared with the amount the give the federal government. However, given that states are inevitably more prosperous than territories, it is likely that Puerto Rico, when given the opportunity to take on the rights and responsibilities of a state, will be able to contribute more to the United States as a state than it can as a territory.
In the meantime, it is not appropriate for Congress to use the lack of income tax receipts as an excuse for the unjust treatment of Puerto Rico. Still, statehood is the solution to the inequities in the system. Contact your legislators now and make sure they understand the need for action on Puerto Rico’s political status.
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