Bush Puerto Rico Cut Would Cost 100,000+ More Families than Estimated
President George Bush’s proposal to prevent Puerto Rican workers with children from receiving refunds of payroll taxes would discontinue the assistance to over 100,000 families more than has been publicly estimated.
U.S. Internal Revenue Service (IRS) figures suggest that the number of Puerto Rican families that would lose the assistance would be more than three times as many as has previously been reported.
An unreleased IRS report states that 152,000 Puerto Rican families received the Social Security and Medicare tax refunds for tax year 2001. The report also notes that 98,000 families got the refunds for 1999.
News stories based on a private tax preparation company’s experience have only estimated that 45,000 families claimed the refunds for last year and a total of 100,000 are eligible.
Calderon Covered Up IRS Report
The office of Puerto Rico Governor Sila Calderon ("commonwealth" party/no national party) has had a copy of the IRS report for some time, according to an official who does not want to be identified.
Neither Calderon nor any of her aides have made the information public nor corrected the erroneous, lower public estimates of the number of Puerto Rican families who would lose assistance under the Bush proposal. This includes Puerto Rico’s official representative in the U.S. House of Representatives, Resident Commissioner Anibal Acevedo Vila, a Calderon protégé who is the "commonwealth" party’s candidate to succeed the retiring Calderon and who is coordinating closely with her on the issue.
Both Calderon and Acevedo have downplayed the issue and the importance of the Bush proposal -- which would prevent Puerto Ricans from receiving more than $2.1 billion in payroll tax refunds over the next decade.
They have also made no evident efforts to prevent the proposal from being enacted into law, unlike statehood party resident commissioner candidate Luis Fortuno, a member of the Republican National Committee, and an economics think tank in the Commonwealth, the Center for the New Economy. Calderon did not even mention the issue in a recent meeting with the director of President Bush’s office on proposals that would affect the federal budget.
Calderon and Acevedo have, additionally, declined to seek an expansion of the refund program to Puerto Rican workers with one child or two children. In the Commonwealth, only workers with three or more children can receive the refunds. Refunds are paid to workers with any number of children in the States.
Acevedo went so far as to publicly dismiss legislation to treat Puerto Ricans equally in the program when it was sponsored by U.S. Senator Bob Graham (D-FL). Graham is a senior member of the Senate Finance Committee, which has jurisdiction over the legislation. He was also on Democratic presidential candidate John Kerry’s ‘short-list’ of vice-presidential running-mate possibilities and is a supporter of Puerto Rico’s leading candidate to replace Calderon, former Governor Pedro Rossello (statehood/D).
Kerry, also a Senate Finance Committee member, recently picked up on Graham’s proposal by pledging to work to expand the payroll tax refunds to cover low-income workers in Puerto Rico with one child or two children.
Calderon and Acevedo specifically refused to seek an expansion of the refunds to Puerto Rican workers with less than three children when legislation to increase the amount of the refunds was considered in the House and the Senate last year.
This past week, leaders of the Republican majorities in both houses of the Congress tried to reconcile differences between the House and Senate bills with a provision that would have increased the refunds to currently eligible workers for two years. The goal was to enable President Bush to sign the increase and other popular tax cuts into law next week during the Democratic National Convention, which will officially make Kerry the Democratic Party nominee for president against republican Bush.
The effort failed, however, when aides to Bush insisted that the tax cuts be extended for five years rather than just two. Congressional Republican concerns about the cost of a five-year extension prevented agreement from being reached this week.
Acevedo and Calderon do not like the tax refund program applying to Puerto Ricans because it contradicts a claim that they make regarding the Commonwealth’s "fiscal autonomy." They assert that the autonomy prevents the U.S. Government from applying tax laws to the territory rather than just permits the Commonwealth to enact ‘State’ tax laws.
In fact, the Commonwealth’s fiscal autonomy is no greater than that of a State or of the other U.S. territories: The Commonwealth can levy ‘State’ and local level taxes and the federal government can -- and has -- applied federal tax laws to the Commonwealth.
To obtain the refunds, Puerto Rican workers -- like workers in the States -- have to file a federal income tax form even though they -- like low-income workers in the States -- owe no federal income tax.
The refunds also demonstrate to Puerto Ricans that most would not have to pay federal income tax if federal income tax laws are extended in full to the territory. In Puerto Rico, federal taxes are now only collected on income from the States, which most Puerto Ricans do not have.
Most Puerto Ricans would not have a federal income liability even if the law is extended in full because their incomes are too low. The "commonwealth’ party uses an inaccurate threat of a federal income tax burden, however, to discourage Puerto Ricans from supporting U.S. statehood.
The refunds are a Clinton Administration expansion of the Child Tax Credit. The tax credit enables middle-income workers to reduce their income tax liability based on the number of children that they have.
In the States, the refunds provide an equivalent amount of assistance -- now $1,000 per child -- to workers with incomes too low for them to owe income tax. The proposal was enacted into law --
- To provide equity between low and middle income workers,
- To aid low-income working families,
- To make work that much more rewarding than ‘welfare’ for people who can only get low-wage jobs, and
- In recognition of the fact that low-income workers pay federal payroll taxes even though they do not pay federal income taxes.
Puerto Ricans pay federal payroll taxes equally with other Americans.
Puerto Ricans were inadvertently qualified for the refunds at first but, then, the Clinton Administration decided to let the assistance be extended to them.
A difference between the program as it applies in the States and its application in the territory, however, is that middle-income workers in Puerto Rico receive refunds while middle-income workers in the States receive credit against income tax liability instead.
The Bush proposal not only proposes to discontinue the assistance to the Puerto Rican workers now eligible for it -- low and middle income workers with three or more children -- it also includes specific language to prevent the refunds from going to Puerto Rican workers with one child or two children -- potentially hundreds of thousands of more Puerto Rican families.
Puerto Rican workers with one child or two children now do not receive the refunds because low-income workers in the States receive refunds under a related program, the Earned Income Tax Credit, which does not apply at all to Puerto Ricans. In the States, the Earned Income Credit refunds cover workers with one child or two children and the Child Tax Credit refunds cover workers with more children.
The Graham and Kerry proposals would also extend the Earned Income Credit program to low-income Puerto Rican workers to help them and the economy of the territory.
Bush’s proposal was hidden in his budget for the fiscal year that begins October 1. White House budget documents do not mention it. Neither does the two-page Treasury Department explanation of the overall proposal of which it is the major part.
The overall proposal would also simplify the income tax form for claiming the refund. A Bush Administration spokeswoman said that simplifying the form for nine million claimants in the States was the reason for discontinuing the refunds to Puerto Ricans.
The staff of the Congress’s bipartisan Joint Committee on Taxation discovered that the proposal would cut Puerto Ricans out of the program. It issued a report pointing this out shortly after Bush’s proposal for the federal 2005 budget and its explanations were sent to the Congress in February.
The report noted that the ostensible goal of simplifying the form for claiming the refunds could be accomplished without denying the refunds to Puerto Ricans. The report also stated that almost all of the more than $2.1 billion that the proposal would keep in the federal treasury over 10 years would come from excluding Puerto Ricans from the refunds many are now receiving.
The facts that almost all of the proposal’s cost savings would come from discontinuing the refunds to Puerto Ricans and the Treasury Department had a similar estimate of the savings prove that the proposal is an intentional Bush Administration initiative -- by far it’s most substantial initiative regarding the territory out of the few that it has put forth.
Proof is also provided by the IRS report of the numbers of Puerto Ricans families benefiting from the program. The report dates to December of last year -- two months before the Bush proposal was sent to the Congress in hidden form.
Information suggests that Calderon’s office knew of the IRS reports numbers before Bush made his proposal. This could not be confirmed, however.
It is known, though, that the Joint Tax Committee’s warning about the proposal was made available to all representatives in the Congress -- including Acevedo -- in February and that Acevedo did not alert the public to it or apparently work against it.
The proposal only came to public awareness last month due to the efforts of a Washington economic institute, the Center for Budget and Policy Priorities, which works with the Puerto Rico economic center and other private news media sources in Washington.
The Bush proposal has not been acted upon in the Congress but it also has not been rejected. In fact, Senate Finance Committee Chairman Charles Grassley (R-IA) praised the package of tax simplification proposals in which it was contained.
The head of the Center for Budget and Policy Priorities is concerned that the proposal’s $2.1 billion would be attractive to members of the Congress who have votes -- that is, members from the States -- as a means of helping to pay for the popular tax cuts for the States that most want to extend.
Votes For Unrepresented Americans On Democratic Convention Agenda
Democratic National Convention planners this week agreed to focus more attention on that fact that a substantial jurisdiction of the United States lacks the basic element of representative democracy: equal voting representation in its national government.
The jurisdiction that will receive the attention is the District of Columbia, the ‘seat’ of the federal government. DC’s mayor complained that a tentative Convention agenda failed to focus attention on the district’s lack of democracy. His protest and others led to DC’s Delegate to the House being given a speaking opportunity on the program during national television ‘prime time.’
DC has voting representation in the election of the president and the vice president due to an amendment to the U.S. Constitution. Puerto Rico "commonwealth" party leaders at the time asked that their territory not be included in the amendment.
Like Puerto Rico and the four other unincorporated territories of the U.S., DC lacks voting representation in the Congress, however.
DC’s petition for statehood has been blocked by Republicans in Congress. Most of DC’s voters are Democrats and are of African origin.
Some Republicans in Congress have also opposed statehood being an option for Puerto Rico. They believe that Puerto Ricans, who are almost uniformly of Hispanic heritage, would be primarily Democratic, although Puerto Rico’s politics are conducted between local political parties rather than the national parties.
The Democratic Party’s Platform for this November’s elections pledges to support equal voting representation for DC. It also pledges to work for Puerto Ricans obtaining equal voting representation. In Puerto Rico’s case, however, the commitment is open to equal voting representation being in a government of a sovereign nation of Puerto Rico or in the U.S. Government.
The commitment has been praised by statehood party members who are national Democrats as well as by "commonwealth’ party national Democrats who favor Puerto Rico becoming a sovereign nation in free association with the U.S. It has been the subject of continuing criticism, however, by "commonwealth" party leaders such as gubernatorial candidate Acevedo Vila.
"Commonwealth" party resident commissioner candidate Senator Roberto Prats, the chair of Puerto Rico’s Democratic committee and delegation to the Convention has privately groused about the position -- which the party first adopted in 2000 -- but has muted his criticism in public.
Prats, however, has quietly sought a speaking opportunity at the Convention. He has not obtained it as of this writing because it would not be supported by the statehood party half of the delegation unless a statehooder is also given a chance to speak.
The Platform also supports a democratic form of government -- presumably nationhood -- for the four other, much less populous territories of the U.S.
McClintock Lobbies For Puerto Rico Commemorative U.S. Quarter
Statehood party Senate Minority Leader (and Democratic National Committee member) has been lobbying the Congress for the federal government to issue quarter dollar coins commemorating Puerto Rico and the other territories and DC.
Resident Commissioner Acevedo has been inactive on the issue. It is not know whether this is because of the relatively little amount of time that he spends in Washington or because the coin would further clarify that Puerto Rico is U.S. territory rather than an "ally" of the U.S., to use a term favored by Acevedo’s mentor, Governor Calderon.
Quarters are being issued in honor of the 50 States.
The House, in which Acevedo serves, passed legislation to add the territories, including PR, and DC to the commemorative coin program -- as it has in past years -- but the Senate has not acted on the bill.
Lobbying by McClintock and representatives of the other unrepresented jurisdictions recently picked up support from three senators, Christopher Dodd (D-CT), Robert Bennett (R-UT), and Sam Brownback (R-KS).
