U.S. Supreme Court Rejects Federal Benefits for Puerto Rico Residents

(Bloomberg) -- The federal government can continue to exclude Puerto Rico from a Social Security benefits program, the U.S. Supreme Court ruled in a decision that will stop more than $2 billion a year from flowing to the island’s residents.

Voting 8-1 to overturn a lower court ruling, the justices said the Constitution’s equal protection clause doesn’t require the inclusion of Puerto Rico’s residents in the Supplemental Security Income program, which covers needy people who are blind, otherwise disabled or elderly.

Writing for the court, Justice Brett Kavanaugh said Congress can constitutionally treat Puerto Rico differently than the 50 U.S. states in some circumstances. Although Puerto Rico residents are U.S. citizens, they can’t vote in federal elections and generally don’t pay U.S. income taxes.

“If this court were to require identical treatment on the benefits side, residents of the states could presumably insist that federal taxes be imposed on residents of Puerto Rico and other territories in the same way that those taxes are imposed on residents of the states,” Kavanaugh wrote.

“Doing that, however, would inflict significant new financial burdens on residents of Puerto Rico, with serious implications for the Puerto Rican people and the Puerto Rican economy.”

Justice Sonia Sotomayor, whose family is from Puerto Rico, was the lone dissenter. She wrote that “there is no rational basis for Congress to treat needy citizens living anywhere in the United States so differently from others.”

Covering Puerto Rico residents under the SSI program would cost $23 billion over the next 10 years, according to a 2020 Social Security Administration estimate. The federal government paid out $56 billion in SSI benefits in 2019.

The Biden administration defended the exclusion, arguing that Puerto Rico’s special tax status gave Congress a legitimate basis for refusing SSI benefits to the island’s residents. The administration said the exemption from federal income tax lets Puerto Rico impose its own territorial taxes that it can then use to fund its own benefits program.

The ruling lets the federal government seek to recoup more than $28,000 from Jose Luis Vaello-Madero, a disabled man who received benefits even after he moved from New York to Puerto Rico. The government sued Vaello-Madero in 2017.

Vaello-Madero’s lawyers, backed by the Puerto Rican government, told the Supreme Court that the exclusion was akin to discrimination on the basis of race and national origin, making it all but impossible for the U.S. to justify.

Puerto Rico Governor Pedro Pierluisi decried the decision and called for an end to the island’s “colonial status” in a statement posted on Twitter. “The only and the best solution is statehood,” he said.

The case is U.S. v. Vaello-Madero, 20-303.

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