Federak taxes in US territories

The pay PR income tax instead, which leads to vast complexity since the PR tax rules don't match the federal ones. I know the USVI has similar rules, you pay tax to the USVI rather than to the feds.

Puerto Rico is in the odd position of simultaneously being one of the poorest parts of the US, and the richest place in the Caribbean. Far more money flows from the mainland to PR than the other way, which is what you would expect given its low per capita income, about half that of Mississippi, the poorest state.

If you're going to complain about financial flows, those of us in New York, New Jersey, and California all of which are net donors, would like have a few words with most states in the deep south and rural west, all of which receive much more than they pay in. A fairly reliable rule of thumb is that the louder the locals complain about wanting to get Uncle Sam off their backs, the more Uncle Sam is giving them.

The logic is "no taxation without representation." Since the territories do not have representatives in Congress, they don't pay US income taxes. They do, however, pay territorial income taxes. And they do pay US social security, medicare and self-employment taxes, and are entitled to the related benefits.

Just as the income tax systems of the 50 states don't necessarily "conform" to the Internal Revenue Code, the same is true of the territories. It can get tricky, to say the least.

MTW wrote in news: snipped-for-privacy@googlegroups.com:

Since a series of decisions known as the "Insular Cases", the concept of "incorporated territory" was created, these being "territories" defined by organic acts in the US Congress. Residents of incorporated territories have in general all the rights/responsibilities of US Citizens of the several states (and might include DC in this). The last US Territory (T.H. was granted statehood status 8/21/1959. "Unincorporated territory" residents have various citizenship as determined by the relationship of the possession and the US. These residents have generally been accorded status as "US Nationals" lacking full status of Citizens. Currently only American Samoa is under this regime, though residents of CNMI had option of retaining US National status when law was changed in 1986. Then there's the "minor outlaying islands" but these don't have any government per se so there isn't any special status AFAIK (eg Midway, Line Islands, etc).

scott s. ..

What about Puerto Rico?

The term Commonwealth doesn't mean anything. Puerto Rico and the CNMI are incorporated territories for all meaningful purposes.

Similarly, Massachusetts, Pennsylvania, Virginia, and Kentucky are states no matter what they call themselves.

R's, John