Is Puerto Rico a Welfare State?

“Welfare state” actually means “a system whereby the government undertakes to protect the health and well-being of its citizens, especially those in financial or social need, by means of grants, pensions, and other benefits.” That’s what the dictionary says.

But we are seeing plenty of people referring to Puerto Rico as a “welfare state,” and that’s not what they mean. They mean that the state of Puerto Rico will be one of the states that receives lots of government funding.

Which states are “welfare states”?

WalletHub produces an annual list of the most and least dependent states in the U.S. as of this writing, New Mexico is the most dependent state, followed by Kentucky and Mississippi. The least dependent states are Delaware, Kansas, and Illinois. Since Puerto Rico is not a state, it is not included.

Source: WalletHub

Dependence is calculated by how many government contracts and grants a state receives, as well as how much they receive in social services. Arguably, contracts and grants aren’t welfare payments. In fact, the U.S. government uses the term “welfare” for just one program: TANF, or Temporary Aid to Needy Families. Other government benefits may be included when people talk casually about welfare.

HowMuch.net calculates how much each state receives in “welfare” — government support for individuals. California, New York, and Texas top this chart, probably because they have the largest populations.  There is no attempt at this website to compare the welfare intake with the amount each state pays in federal taxes.  In 2010, a pair of economists calculated Puerto Rico’s “net federal expenditures per capita” and found that 17 states, plus Washington, D.C., received more than Puerto Rico after considering federal taxes paid.

RichStatesPoorStates ranks all 50 states according to economic outlook, from #1 Utah to #50 New York. Judging by income data from the Census, New Hampshire is the richest states and Mississippi is the poorest.

What about Puerto Rico?

One thing you can say for sure after checking all these data-heavy sources is that they don’t agree.

Puerto Rico would receive more federal funds as a state, and wealthier residents would also pay federal income taxes. Gus Portela of the Puerto Rican Chamber of Commerce reports that Puerto Rico is expected to bring $7 million to $10 million in revenue to the United States.

Would Puerto Rico get more in government help than it would pay in taxes?

That would probably be true if Puerto Rico became a state today. Thanks to the current territorial status, Puerto Rico has had a much higher poverty rate and much lower employment rate than any of the 50 states for years. A pair of devastating hurricanes in the fall of 2017 shut down some ten percent of local businesses and created economic catastrophe for many households. Puerto Rico definitely needs some help right now.

Statehood 2021

The Puerto Rico Admission Bill calls for statehood for Puerto Rico no later than January 2021. If that bill passes, Puerto Rico’s position will change.

Investment from corporations in the past was based on tax incentives that cost the federal government twice what the companies “invested.” In spite of the high cost, these investments created few jobs. It was most profitable for the companies in question to wash lots of funds through Puerto Rico, not to create sustainable jobs. Naturally, that is what they did.

A stable political status and business-friendly policies would change that. Puerto Rico would be able to draw investors interested in establishing businesses in Puerto Rico. The trend of “onshoring” or “reshoring” — bringing manufacturing back to the U.S. from countries like China and Bangladesh — would be a natural fit for the state of Puerto Rico. Puerto Rico, like Hawaii and Alaska, would see strong growth in industries like tourism, construction, and manufacturing. Local entrepreneurs would benefit from federal support for small businesses.

By 2021, Puerto Rico would be in a stronger economic position. Just as territories which have become states are now in stronger economic positions than when they were territories, Puerto Rico will also benefit economically from becoming a state.

Should this affect statehood?

Looking further out into the future, it is impossible to make an accurate forecast. The most recent territories to become states, Hawaii and Alaska, are two of the richest states in the nation. Both were impoverished when they were territories.

It is just as reasonable to assume that Puerto Rico will increase its share of tourism, medical tourism, electronics, and manufacturing to become a wealthy state as to assume that it will be a poor state.

Does that matter?

It has never been the case that the United States chooses rich territories for statehood. Congress has been enthusiastic about statehood for territories that had gold, strategic importance, or a convenient political position. States have also been accepted when they were in debt, at war, and suffering through natural disasters. The myth that territories should be solvent if they want to become states is just like the myths that territories must speak English or apply in pairs or have consensus on statehood before they can become states.

Congress can choose to make Puerto Rico a state because it will be better for the U.S. as a whole to have a prosperous state than to have an impoverished territory. They can make Puerto Rico a state because it is the right thing to do. Either way, there are no financial requirements for statehood.

7 Comments

Boricua

Puerto Rico get around 4 billion in welfare funds, but pay 8.9 billion into Medicare and Social Security funds; in addition, because of the federal Cobatage Law, Puerto Ricans also pay 1.5 billion each year to the US; moreover, congress had annulled the consent decreed, which was a tax haven that expired in 1986, but those that were granted the decreed were tax exempt for 50 thru 100 years, where they never paid taxes to the Puerto Rican goverment or people of Puerto Rico, these stores, JCPenny, Sears, Kmart, Walgreen, CVS, McDonalds, Taco Bell, and other chain stores received huge tax haven, and made 32 billions in sales yearly in Puerto Rico, these are direct sales
The Puerto Rican goverment also purchased yearly, 22 billion of indirect imported goods, since Congress does not permit to open its borders; therefore, forcing Puerto Rico to be one of US biggest importers of US goods. The federal programs in Puerto Rico, such as US courts, post offices, military hospitals, passengers and cargo planes are all tax exempt from paying taxes to the Puerto Rican goverment, therefore, making billions in sale and service. If you add who benefits the most here, it is obvious, the US. Now, congress imposed a sub-minimum wage for working Puerto Rican adolescents, which is non competative salary, which is equivalent to income made by disabled adults working in shelter workshops in the US mainland, and this is a barbarity. If you add the billions of dollars made from indirect, direct sales, cobbatage taxes, and Medicare and Social Security Taxes paid by Puerto Ricans $154 billion minus $ 4.5 billion received in federal aid (wefare, food stamps, pell grant,HUD, etc), Puerto Rico is not a wefare state as the US makes more than what it receives in federal aid.

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Rk

Your dat on the amount PR pays in Medicare and SS is wrong. The amount they reciieve is also way off. PR receives more than 20 billion in benefits paying in less than 4. I cannot confirm or deny the other data, however welfare revived is substantially more than paid. Also individuals pay no US income tax.

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Proud Female Veteran

All federal employees active & retired on the island pay federal taxes.

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Boricua2

Sorry boricua, but nearly everything you wrote is pure nonsense. The GNP of PR is about $60B. About $25B comes from fed payments to island residents and about $4B in taxes are paid to the feds. Much of this is from the military and and federal employees who are not tax exempt like residents of PR for local earnings. Even so, tax evasion, ss and medicare payments is rampant on the island except for bigger companies. Many people work for cash only. About half the population receives food stamps and the ss disability payments are about double the rate of the mainland. The cabatage expense you talk about results from having to import everything since nobody works in agriculture since so many get “free” food, apartments, electric and water. I have lived in PR for over 15 years and operated a business there. In short, many locals complain about being a colony. Thats nonsense, the vast majority oof the money comes TO the island. That makes the US a colony of PR. This of course doesnt include the payments to help for Maria which is already in excess of $25B. Its one thing to be a leach, totally another thing to be an ungrateful one. The reason we buy from sams and kmart is that they sell cheaper than any one else. We can buy most goods from anywhere in the world and often do without taxes to the feds. The same laws apply to us as the folks on the mainland. Our biggest problem, is that we continue to vote for theives that steal a large amount of our tax dollars and the fed payments and while they send the fbi to catch embezzlers of fed funds, they seem to leave the rest to us. If you want to see the potential solution to our island problems, look in the mirror. Its up to us.

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Boricua

2008 data recorded in Hacienda (Puerto Rican) treasury Department gives clear detail that the USA, takes or makes over 64 billion, an PR only got 4.5 billion in aid. This figure does not include, what USA makes in all. federal programs, such as federal courts, federal aviation both pasenger and cargo, federal post offices sales of goods, military. Stores, as these earnings are never recorded by Hacienda, as they are federally exempt from paying taxes to the Puerto Rican people or government. I am right, the USA is making lots of wealth from P.R., and giving back so little aid.

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Reason

One thing is for sure Puerto Ricans have no logic to question even the most absurd information they pick up. “…made 32 billions in sales yearly in Puerto Rico,” LOL, Yea, every man woman and child would have had to spend $10,000 each at those stores. 30 fuggin’ dollars each per day. You have the silly brain.

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