Evaluating the Impact of Expanded Tax Credits on the Wellbeing of Puerto Rican Families

• In Event: Family Support in the Tax Code

Abstract

This paper examines how expansions of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) have influenced Puerto Rico’s economy. Historically excluded from federal EITC and CTC benefits due to their unique tax status, Puerto Rican residents have relied on locally administered versions of these credits, which have evolved in response to fiscal constraints, natural disasters, and federal policy changes. Using data from the Puerto Rico Community Survey, we provide the first empirical evaluation of two decades of tax credit policies, focusing on the 2018 expansions and the 2021 American Rescue Plan Act. We analyze how these policies affect labor supply, earnings, reliance on public assistance, and broader family well-being, including housing, migration, and education. The findings show that more generous credits increase household income, promote work, and reduce poverty, with the strongest effects among unmarried mothers and low-wage workers. Expanded credits also appear to stabilize housing, reduce migration to the mainland, and increase school enrollment, suggesting positive spillover effects on family stability. By merging survey data with neighborhood-level indicators, this study provides a comprehensive picture of tax credit effects in a low-wage, high-poverty setting. The results highlight the role of refundable credits as effective anti-poverty tools and suggest that similar policies may improve economic wellbeing in U.S. territories and other low-income areas.

Author

• Jacob Bastian, Rutgers University