Child Tax Credit, Work Credit to inject $2.6B into Puerto Rico economy
More than 304,000 families could benefit this year from the Child Tax Credit (CTC) and 466,000 families from the Work Credit benefit, which together will benefit their pockets and inject up to $2.6 billion into the Puerto Rican economy, according to for Youth Development Institute of the nonprofit Espacios Abiertos (EA).
Economist María Enchautegui, the Institute’s director of research, said the economic injection of the Child Tax Credit or Child Dependent Credit could reach $1.76 billion if 100% of eligible people claim this credit or $1.4 billion if 80% request it.
The Work Credit would represent another $800 million in disbursements in 2022, said economist Daniel Santamaría-Ots, senior analyst of Public Policy at EA.
Through the Child Tax Credit, families could get $3,600 for children from 0 to 5 years old or $3,000 for children from 6 to 17 years old. Meanwhile, people who work and have incomes of less than $44,000 per year may be eligible to receive up to $6,500 for the Work Credit, after the redesign of this incentive as of this tax cycle.
Both credits can improve the economic conditions of families living below poverty levels, the economists said during a joint round table.
“The CTC is going to have a momentous effect on low-income families in Puerto Rico. These benefits can transform the quality of life of children and young people. In addition, it presents a great opportunity to maximize the potential of childhood in Puerto Rico,” said Enchautegui.
She estimated that 304,000 families are eligible in Puerto Rico for the Child Tax Credit, which represents 565,000 minors between the ages of 0 to 17 years. The average income of families living below the poverty level and accessing this credit would increase by 53%.
If married couples with minor dependents and incomes below $150,000 and single-parent families with incomes less than $75,000 are considered, at the municipal level the five-year estimates reveal that:
- In 34 municipalities, more than 99% of families with children and youth qualify.
- The municipalities with the highest number of minors are Arecibo, Bayamón, Caguas, Carolina, Guaynabo, Ponce, San Juan, Toa Alta, and Toa Baja.
Meanwhile, Santamaría-Ots explained that 466,000 families are eligible for the Work Credit, whose maximum limit has been increased from $2,000 to $6,500 as of this year. The amount varies according to income, number of children and if the person is married or single.
According to the experience in the United States mainland, the Work Credit, in addition to improving the economic security of the people who access it, encourages work, and increases the formal workforce. For every $1 invested in credit, there is a return of $1.50 to $2 for the economy.
Meanwhile, a recently published study by EA using 2019 payroll data estimates that some 124,925 people could cross the poverty line if they receive the Work Credit. This number can increase significantly when the people that the credit encourages to file a return and move from the informal to the formal economy are considered.
“This year 2022, there is the possibility of accessing more than $2.5 billion between the new credit for work and the new credit for dependent children. This represents a great opportunity for the economy of thousands of households and for Puerto Rico,” said Santamaría-Ots.
“This is also an opportunity for organizations like [the Institute] and EA that promote fiscal policies that address inequality and poverty to document, analyze and evaluate the effect of these programs, and advocate at the federal level to expand and maintain them. However, these opportunities will fall short if we don’t manage to inform all the people who qualify to request and receive both reliefs,” he said.
Given that this year’s tax cycle is about to start, and that the credit for work must be requested from the Puerto Rico Treasury and the credit for dependent minor is requested from the IRS, the two nonprofit organizations have come together to get the word out so as many eligible people can learn and benefit from both reliefs.
To do this, they created a website through which people can learn the requirements to qualify, calculate the amount they could receive and where to apply for each credit. From this joint website, users are redirected to the pages of each credit that have been developed by both EA, creditoportrabajo.com, and the Institute, reintegroctc.com.
