The U.S. Government Accountability Office published a report on March 4th titled “Information on How Statehood Would Potentially Affect Selected Federal Programs and Revenue Sources.” This report was requested by members of Congress, and reviews the fiscal implications for all federal programs assuming Puerto Rico were to become a state.
The report also highlights various economic and fiscal factors that could influence changes in spending and revenues if PR became a state. The GAO reviewed federal laws and regulations and interviewed federal and Puerto Rico agency officials to gather information for the report. Furthermore, the GAO reviewed PR government economic data and interviewed a number of current and former government officials.
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Puerto Rico: Medicare
The GAO report determined that the federal government would have paid out up to an additional $1.5 billion in Medicare payments in 2010 if PR had been a state. “In fiscal year 2010, actual federal Medicare spending in Puerto Rico was $4.5 billion; if Puerto Rico had been a state in calendar year 2010, estimated federal spending would have ranged from $4.5 billion to $6.0 billion.”
Medicaid expenses would increase significantly if PR becomes a state. “In fiscal year 2011, actual federal Medicaid spending in Puerto Rico was $685 million; if Puerto Rico had been a state in calendar year 2011, estimated federal spending would have ranged from $1.1 billion to $2.1 billion.” The report also notes that Medicaid expenses would likely increase at a faster than projected rate as there are very few nursing homes in PR right now, and a large number of nursing homes would almost certainly be built as soon as Medicaid makes it economically feasible.
SNAP (food stamps)
SNAP spending would increase significantly if PR were to become a state, but the increase would be offset by SSi benefits received by a number of SNAP program participants. “In fiscal year 2011, actual federal spending for a similar program in Puerto Rico was $1.9 billion; if Puerto Rico had been a state in calendar year 2011, residents would have been eligible for SNAP, and estimated federal spending would have ranged from $1.7 billion to $2.6 billion. One reason why the low end of the estimate range is less than actual spending is because participants’ benefits would be reduced because of benefits received from SSI, for which Puerto Rico residents would newly qualify.”
The feds would be on the hook for an additional $1.5 to $1.8 billion in Social Security payments if PR became a state. “In fiscal year 2011, actual federal spending for a similar program in Puerto Rico was $24 million; if Puerto Rico had been a state in calendar year 2011, residents would have been eligible for SSI, and estimated federal spending would have ranged from $1.5 billion to $1.8 billion.”
Individual and corporate taxes
If PR had been a state in 2010, individual income taxes would have added more than $2 billion to the treasury’s coffers. “If Puerto Rico had been a state in 2010, estimated individual income tax revenue from Puerto Rico taxpayers would have ranged from $2.2 billion to $2.3 billion.”
Calculating potential corporate income taxes that would be paid by PR-based companies is extremely difficult, given that companies would almost certainly relocate assets from Puerto Rico to lower tax foreign locations. The GAO estimates that Puerto Rican companies would have paid about $1.4 billion in corporate income tax in 2009 if PR had been a state.