Should Disaster Recovery for Puerto Rico Depend on Tax Payments?

It’s often said that tough times bring out the best in people. The outpouring of help and compassion for Puerto Rico following the hurricane season is a good example of that.

But there are still people who have a different response. We see in social media and blog comments that some people think Puerto Rico shouldn’t receive disaster relief because the residents of Puerto Rico don’t pay federal income taxes on money earned in Puerto Rico. “Pay taxes to U.S.,” one commenter wrote, “then get some aid, P.R.”

People who have this idea should know a few things.

Puerto Rico doesn’t choose whether to pay income tax.

Puerto Ricans, like all Americans, follow tax laws set by the federal government. The federal government decided to exempt income earned in Puerto Rico from federal income tax. Residents of Puerto Rico don’t have the option of paying or not paying income tax on their earnings.

Some states charge state income taxes and some don’t. Nobody suggests that those states that don’t collect state income tax shouldn’t get federal funding. Puerto Ricans pay local taxes, payroll taxes, business taxes, and Social Security taxes. Residents of Puerto Rico also pay federal income tax on money earned outside of Puerto Rico.

In 2012 and again in 2017, the voters of Puerto Rico voted to have all the rights and responsibilities of statehood, including federal income tax. Congress has not yet taken action on those votes. When they do, residents of the state of Puerto Rico will have the opportunity to pay federal income tax.

Half of residents of states don’t pay income tax.

People living in the 50 states have to file federal income tax returns. Only about half actually pay any income tax. Many don’t earn enough money to owe any tax payments to the U.S., and many of these people receive a “refund” that includes more money than they paid in. This is due, in part, to the Earned Income Tax Credit and the Child Tax Credit.

Puerto Rican residents do not receive the Earned Income Tax Credit. They are eligible for the Child Tax Credit only if they have three or more children. People on the mainland receive both those credits.

There are also people in the states who earn quite a bit of money and still don’t have to pay income tax because of deductions and credits. In a 2011 report, the Tax Policy Center explained why thousands of millionaires didn’t pay income tax.

Whatever the reason, the fact remains: plenty of people who suffered in the wake of Hurricane Maria and Hurricane Sandy didn’t pay any income tax. Puerto Rico is no different.

Disaster aid isn’t connected with income tax.

Income tax became a permanent part of U.S. law in 1913. Organized federal disaster assistance began after World War II, and the first Disaster Relief Act was passed in 1950.

But there was federal disaster assistance before 1913. In 1803, Congress passed an act giving disaster relief funds to a New Hampshire town damaged by a fire. The 1889 Johnstown Flood disaster received public funds as well as lots of private donations. The U.S. Army provided public medical assistance after the Civil War. Federal disaster relief was controversial in the 19th and early 20th centuries, but it was never connected with income tax.

No income tax, no disaster aid? That’s never been the deal. In fact, the Stafford Act, a law organizing systematic disaster relief in the U.S., specifically lists Puerto Rico as a U.S. possession to be treated just like the states in case of disaster.

Knowledge can help.

Those who are willing to see their fellow Americans in Puerto Rico suffer and even die because they fall under different tax laws may be hard-hearted, but they might change their minds when they understand the facts. We’ve already seen that people who know Puerto Ricans are citizens of the U.S. are more strongly in favor of disaster aid for Puerto Rico.

Puerto Rico won’t face these issues after statehood. Join us to bring statehood to Puerto Rico. We can’t go back; let’s go forward together.

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