Puerto Rico:

Background Information on Applicable Federal Legislation, Its Governmental Structure, and Its Finances

T-HRD-90-7: Published: Nov 15, 1989. Publicly Released: Nov 15, 1989.

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GAO discussed Puerto Rico's relationship with the federal government, focusing on social programs and tax laws, and Puerto Rico's government structure compared to the 50 states, as a background for political status deliberations. GAO noted that: (1) federal spending totals about 30 percent of Puerto Rico's gross national product; (2) islanders and U.S. corporations conducting business in Puerto Rico are exempt from federal income taxes; (3) the federal treasury would have received an estimated $2.4 billion in 1983 if Puerto Rico was federally taxed; (4) federal funding for Puerto Rico's Adult Assistance, Nutrition Assistance and Aid to Families with Dependent Children programs is capped and benefits are lower than comparable state programs; (5) Puerto Rico's central government is its largest employer at 23 percent compared to 7 percent for the 50 states; (6) Puerto Rican municipalities provide fewer services and rely more heavily on the central government than U.S. localities; (7) Puerto Rico's public corporations provide more services than similar state enterprises; (8) Puerto Rico's public debt is higher than the states' average and is largely attributable to its public corporations; (9) although 24 percent of Puerto Rico's revenues are attained through federal assistance, the effect political independence would have on revenues is unclear; (10) an independent status would create new defense, postal and other expenditure demands; and (11) statehood status could increase previously capped benefit program expenditures.

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