Espacios Abiertos says denial of inflation adjustment to impact the poor

By THE STAR STAFF

The watchdog organization Espacios Abiertos warned Tuesday that the Financial Oversight and Management Board’s decision to deny the inflation adjustment to Puerto Rico’s Earned Income Credit (EIC) for tax year 2025 will directly exacerbate working poverty by keeping benefits frozen despite rising living costs.

On Tuesday, Gov. Jenniffer González Colón was slated at press time to sign into law the bill that would give tax relief checks to salaried workers.

“In Puerto Rico, the Earned Income Credit has wide reach and a tangible effect on household income,” said Daniel Santamaría Ots, co‑executive director of Espacios Abiertos, in a written statement. “During tax year 2024, the credit benefited 734,619 families -- six out of every 10 households that filed a return -- with an average credit of $1,974 per family.”

According to the organization’s analysis, the oversight board confirmed in an Oct. 29, 2025 letter to the island Treasury secretary that it would deny the inflation adjustment, citing Section 204(b)(4) of the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA. That means the credit parameters for 2025 will remain unchanged from the previous year, even as the cost of living continues to rise.

“The freeze especially harms households with dependents and single filers, who are less able to absorb increases in the cost of living,” Santamaría Ots said, noting that most of those affected come from families with one or two dependents.

He added that the impact of the decision “goes far beyond fiscal figures,” warning that it creates a disincentive for formal employment with consequences for local small and midsize businesses that already struggle to find workers.

Wilmarí de Jesús, public policy analyst at Espacios Abiertos, said the credit has had structural effects on Puerto Rico’s economy.

“The benefits of this program go beyond a one‑time check,” she said. “They incentivize work and encourage economic activity to move into the formal market.”

De Jesús also noted that the number of people filing tax returns has remained elevated since the credit’s implementation in 2021, broadening the tax base and creating a multiplier effect in the economy.

Espacios Abiertos spokesperson Ataveyra Medina Hernández said the organization has requested meetings with the oversight board, the Puerto Rico Legislature, and the Treasury Department to discuss alternatives.

“We are in conversations with the Board and have requested meetings to deepen the analysis and protect this incentive, which has proven so effective in promoting Puerto Rico’s economic development,” she said.

The group’s analysis estimates that without the inflation adjustment, an additional 7,475 people will remain below the federal poverty threshold in 2025. Espacios Abiertos urged the Board to reconsider its decision and incorporate an automatic inflation‑adjustment mechanism into the fiscal plan.