Low income workers with children in the States can reduce their Federal income tax — or get a payment from the Federal government to the extent that they do not owe tax — through the Earned Income Tax Credit (EITC).
The Center on Budget and Policy Priorities has issued a report showing how the credit has affected each State. The report explains that the EITC has encouraged work among low-income individuals, benefited children at every stage of life, and has lifted some nine million working families across the nation out of poverty.
Residents of Puerto Rico do not qualify for this program proven to help low income workers because the islands’ treatment in Federal tax law.
According to the report, EITC payments tend to be used for major car repairs, college tuition, and other large expenses which families might otherwise not be able to afford.
Because many of these larger expenses are related to low-income individuals’ ability to find and keep jobs, they do more than just help with temporary cash flow issues. This is why the EITC lifts families out of poverty.
The U.S. Government Accountability Office last year estimated Puerto Ricans would have received $525 million in EITC benefits in 2010 if the territory had been a State. $473 million of this would have been paid to low-income workers because they would not have owed Federal income taxes.
As a candidate, President Obama pledged to extend the payments portion of the EITC to Puerto Ricans. As president, however, he has not tried to follow through on the promise.
Puerto Rico had its own EITC until this past July 1st. It lowered the income taxes of low-income workers up to $350 a year.
The program was repealed by the Legislative Assembly, however, at the request of Governor Garcia Padilla.