Income inequality among Puerto Rican youth represents a persistent structural challenge that compromises the island’s capacity for economic development. Young adults ages 19-24 are disproportionately affected by high unemployment, stagnant wages, precarious employment, and geographic disparities in opportunity. This study will examine whether two tax policy interventions—one exempting workers ages 16-26 from income taxation up to $40,000 (Law 135-2014), and the other an expansion of the Earned Income Tax Credit to childless young adults—reduce income inequality among young adults in Puerto Rico. The team will use administrative tax data from the Puerto Rico Department of Treasury and a synthetic birth cohort methodology to evaluate both within-group and between-group inequality. Within-group analysis will assess whether the expansion of the Earned Income Tax Credit to childless young adults and whether Law 135-2014, which exempts workers ages 16-26 from income taxation up to $40,000, reduce income inequality among 19-24-year-olds by narrowing disparities across the labor income distribution. Between-group analysis will determine whether these policies disproportionately benefit or neglect this age group relative to adjacent cohorts. Findings will contribute to research on the potential of youth-focused tax policies to reduce economic inequalities and inform legislative discussions in Puerto Rico.
Have recent changes in Puerto Rico’s tax policies reduced economic inequality among residents of the island?
