The Supreme Court heard arguments in the case of José Luis Vaello-Madero, a resident of Puerto Rico who is being sued by the Social Security administration for $28,081 which they overpaid to him. He applied for and began receiving SSI disability benefits while living in New York City. When he moved to Puerto Rico, he was no longer eligible for the benefits. However, he did not realize this, and Social Security continued paying the benefits for three years before realizing that he was no longer eligible.
When they discovered their mistake, they sued Vaello-Madero for the benefits they had paid him. He won the case in court, but the United States government appealed and pursued the case all the way to the Supreme Court. Arguments began on November 9th, 2021.
The brief from United States vs. Vaello-Madero gives the argument of the United States: that Puerto Rico has a “unique” status, so. Congress is allowed to discriminate against the U.S. citizens who live there.
“Congress can treat Puerto Rico differently subject only to rational basis review, which, according to petitioner, is satisfied by invoking the constitutional distinction between states and territories,” says the brief, describing the position of the United States. In other words, Congress can treat Puerto Rico differently from states because Puerto Rico is a territory.
The DOJ’s lawyer said this in oral arguments: “Much of the revenue that would have flowed into the federal treasury can instead be tapped by territorial government, which therefore has greater leeway to make different fiscal or economic choices consistent with its distinctive status as a self-governing commonwealth.” In other words, since Puerto Ricans don’t pay federal income tax, Puerto Rico has access to the money residents would pay in federal income tax if Puerto Rico were a state.
Justice Sotomayor objected to this claim. “It’s hard to imagine that Puerto Rico has the ability, given that it’s in temporary bankruptcy, to do what you say to be able to raise taxes to help the needy.”
Puerto Rico: separate and unequal?
“Puerto Ricans have contributed in meaningful ways to the nation during the past century. Puerto Ricans have served in the United States military since World War I, with one of the largest per capita enlistments in the United States Armed Forces,” the brief points out. “Today, Puerto Ricans serve throughout the federal government as agency employees, ambassadors, and federal judges.”
They could also have pointed out that Puerto Ricans have contributed significantly in the arts and sciences in the United States, in sports and entertainment, and in business. And yet, as the brief states, “Congress’s ambivalence towards Puerto Rico has led to its ‘unique’ status—an indefinite state of limbo in which more than three million Americans on U.S. soil lack federal voting power and the ability to change this situation on their own.”
The arguments continue to examine the contributions of Puerto Rico, because one of the arguments by the Department of Justice was that Puerto Ricans do not pay federal income tax. The brief points out that people who receive SSI can not work — that is why they receive these benefits. Since they do not work and therefore do not receive any income, they do not pay income tax, even when they live in a state. It therefore makes no sense to exclude Puerto Rico on these grounds.
Congress could change the law tomorrow to require Puerto Rico’s residents to pay income tax, the brief says, and they still would not be eligible for SSI.
The brief also states that Puerto Ricans pay Social Security taxes at the same rate as people living in the states, but receive less in federal benefits.
The outcome of the Vaello-Madero case could have far-reaching consequences for Puerto Rico and for the other U.S. territories.