“Statehood would mean double the taxes!”
“Statehood would doom Puerto Rico to perpetual poverty!”
“You’d pay 33% in Puerto Rico plus 37% in federal taxes –can you give up 70% of your income?”
You see these claims in social media and hear them in public rallies. But is it true? George Laws Garcia breaks it down.
He points out that these myths ignore three important points:
- Income realities: a large share of Puerto Rico’s population lives below the federal poverty line, meaning many households would owe little or no federal income tax. In fact, nearly half of Americans living in the states pay no income tax because their incomes are low enough that they don’t owe income taxes. Average income in Puerto Rico is about one third of average income in the states. The majority of Puerto Rico residents will not owe federal income tax.
- The role of tax credits: one reason that so many people living in the states do not owe income taxes is because they are eligible for tax credits. Puerto Rico currently is eligible for the Child Tax Credit, but not for all the credits people in the states can receive. Also, there have been times in the past when Puerto Rico was not eligible even for the Child Tax Credit — and it could happen again. Congress makes that decision for territories.
- The power Puerto Rico would have as a state to shape its own fiscal future: Congress makes the decisions for territories, but states make their own decisions. States decide on their tax structures. Since Puerto Rico would be more prosperous as a state — every single territory that has already become a state became more prosperous after statehood — the Island could reduce local taxes. Puerto Rico’s taxes are currently higher than those in most states.
- How federal taxes are actually assessed: click through below to get the details.
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