Supreme Court weighs arguments in case that may impact Puerto Rico economy

In oral argument before the U.S. Supreme Court Tuesday the government said that Congress’ exclusion of Puerto Rico residents from federal Supplemental Security Income (SSI) program benefits is rational and does not violate equal protection provisions of the U.S. Constitution.

The case under consideration, United States v. Vaello-Madero, is important because on it hinges the question of whether Puerto Ricans might receive payments that would likely help boost the island territory's economy.

“It is always appropriate for Congress to take into account the general balance of benefits and burdens associated with a particular federal program,” argued Curtis Gannon of the Department of Justice.

The government’s primary contention in the case is that Puerto Rico’s unique tax status justifies exclusion of its residents from certain federal program benefits. The SSI program at issue provides payments to needy aged, blind, and disabled individuals in the 50 States and the District of Columbia, but not to similarly disabled individuals in Puerto Rico.

In response, Justice Sonia Sotomayor questioned the government’s central economic premise for drawing distinctions between needy residents of Puerto Rico and those of the mainland United States.

“It’s hard to imagine that Puerto Rico has the ability, particularly given that it is in temporary bankruptcy, to do as you say and raise taxes to help the needy,” Sotomayor said, pointing out that the U.S. territory’s federal tax exemptions are in place partly because Congress recognized that ”the commonwealth’s economy could not sustain further taxation.”

Sotomayor also stressed that Puerto Ricans are U.S. citizens and that most SSI recipients (no matter where they live) do not pay taxes because they are disabled and unable to work. “Needy is needy,” Sotomayor said.

Other justices pondered the potential big picture and legal implications of ruling against the government, asking for example, whether the Court would have to overturn existing precedent to find in favor of Vaello-Madero.

Justice Amy Coney Barrett wondered whether such a ruling would subject residents of Puerto Rico to taxes that mainland U.S. citizens pay due to what she described as “equal treatment across the board.”

The present case began in 2012, when Jose Luis Vaello-Madero, an American citizen in his late sixties, became ill and unable to work while living in New York. As a result, he began receiving supplemental security income.

A year later, in 2013, Vaello-Madero moved back to Puerto Rico to be closer to family. He continued to receive the SSI benefits for three years before the government terminated the income in 2016 because current law excludes Puerto Rico residents from the program.

The federal government sued Vaello-Madero in 2017, seeking restitution of about $28,000 of what it deemed to be incorrectly paid SSI benefits.

Vaello-Madero filed suit against the government and both the district court and the 1st Circuit Court of Appeals ruled in his favor, concluding that Congress could not deny the SSI program to Puerto Rico residents. The government (at the time former President Trump’s Justice Department) appealed to the Supreme Court.

At that time, then-candidate Biden pledged to end so-called irrational distinctions between Puerto Rico residents and mainland U.S. citizens, But despite outcry from various organizations, the Biden Justice Department continued the appeal to defend the federal statute.

“This provision is inconsistent with my Administration’s policies and values,” Biden said in a June statement. “However, the Department of Justice has a longstanding practice of defending the constitutionality of federal statutes, regardless of policy preferences. This practice is critical to the Department’s mission of preserving the rule of law.”

Consequently, in addition to its contentions about economic benefits and burdens, the government relied on court precedents in Califano v. Torres (1978) and Harris v. Rosario (1980). In both cases, the court concluded that Congress may “treat Puerto Rico differently from states” for purposes of a welfare program if there is a rational basis for the distinction.

During oral argument, several justices asked about whether ruling against the government would require them to overturn Rosario and Torres. Or instead, whether the SSI program is so unique that they could rule in favor of the respondent Vaello-Madero, without overturning the prior cases.

Counsel for Vaello-Madero focused instead on the steadfast contention that the standard for review in evaluating the merits of this case should be a heightened level of scrutiny, rather than rational basis.

“Under well-settled equal protection principles, strict scrutiny should apply to the classification of Puerto Rico residents because they are an easily identifiable, politically powerless minority that has experienced a history of racial and ethnic discrimination,” Vaello-Madero’s counsel, Hermann Ferre’, argued in a brief to the Court.

Justice Elena Kagan posed a question wondering if Congress were to eliminate the SSI exclusion for Puerto Rico, the current case would be moot.

The answer to that could be notable because the government believes that a Supreme Court ruling on the proper standard of review is important for future cases. But, a provision that would extend SSI program benefits to Puerto Rico residents is currently being considered by the House of Representatives, as part of the Democrat’s social spending package.

Either way, the Supreme Court’s decision, which should come by June, is expected to be significant for Puerto Rico’s residents and economy. An estimated 700,000 residents of Puerto Rico could reportedly qualify for SSI and the potential federal government expense is estimated at around $2 billion.