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A difficult question about colonialism, equality and taxation

Updated: Feb 2, 2022

Guam and other US territories are awaiting the Supreme Court ruling on US benefits for jurisdictions that don’t pay federal taxes

By Aurora Kohn Are all U.S. citizens entitled to equal treatment? According to the U.S. government in the case of U.S. v. Vaello-Madero, the answer depends on where that citizen lives.

This has been a perennial question that awaits a landmark decision from the U.S. Supreme Court.

The case of U.S. v. Vaello-Madero, currently pending before the Supreme Court, is poised to profoundly affect the lives of Americans living in Guam and other U.S. territories, where the social security income program is not available.

A similar case involving Guam resident Katrina Schaller is awaiting a decision in the Ninth Circuit Court of Appeals, which has paused the case pending the Supreme Court’s decision on the Vaello-Madero case.

As far as the U.S. government is concerned, federal benefits for aging and disabled citizens do not apply to jurisdictions that do not pay federal income tax.

During the oral arguments in November, the justices scrutinized the merits of previous court rulings that were invoked by Deputy Solicitor General Curtis Gannon, who argued on behalf of the Department of Justice.

Jose Luis Vaello-Madero is a U.S. citizen of Puerto Rican descent who received SSI benefits, monthly cash assistance given to persons who are over 65, blind or disabled and unable to support themselves. He was sued by the U.S. government to recover SSI benefits he received after he moved to Puerto Rico.

Gannon asserted that the SSI program does not apply to Puerto Rico residents.

Vaello-Madero argues that the U.S. government’s case against him is fatally flawed because it violates the guarantee of equal protection contained in the Fifth Amendment, which states that “No person … shall be deprived of life, liberty, or property without due process of law.”

The U.S. government countered that territorial residents may be lawfully excluded by the U.S.Congress from the SSI program because its power to distinguish between the U.S. states and the territories is well settled by the Insular Cases. These rulings paved the way for the U.S. government to deny certain rights and privileges to residents of the territories, even after they became U.S. citizens.

The U.S. government maintains that it only needs to show a “rational basis” for the exclusion of residents of Puerto Rico from the SSI program. This is satisfied by the fact that residents of Puerto Rico do not pay federal income taxes. The funds that would otherwise be paid as federal income taxes are kept by the local government and it is free to use these funds in the manner they deem most beneficial to its residents.

The U.S. government added that allowing residents of Puerto Rico to participate in the SSI program will cost the U.S. government almost $23 billion in the next 10 years, a considerable drain on the national treasury.

As to the issue of equal protection, the U.S. government contends that the constitutional requirement of equal application of the laws only applies to protected classes of individuals and does not apply to geographical locations.

The U.S. government maintained that Vaello-Madero’s disqualification from the program was based on “choice of residence” and “not because of his age, race, gender, national origin, religion, color or disability.”

But Vaello-Madero countered that the SSI law’s exclusion of Puerto Rico residents is based on race because a large majority of residents of Puerto Rico are Hispanic.

More importantly, the group excluded are “politically powerless” since Puerto Rico residents have no participation in the selection of U.S. leaders and do not have voting representatives in the U.S. Congress, making their exclusion even more egregious.

Vaello-Madero averred that the proper test is the “strict scrutiny” test. Under this test, the court must carefully examine and determine that the Puerto Rico residents’ exclusion is not for the purpose of denying a protected class of persons from equal participation in a beneficial program.

He asserted that Puerto Rico’s contribution to the U.S. Treasury is higher than the contribution of some of the states as well as that of the Northern Marianas Islands, which is in a similar situation. Both are U.S. territories whose residents do not pay federal income taxes. However, the residents of the CMMI receive SSI benefits.

Vaello-Madero also disputed the U.S. government’s assertion that its goal in withholding SSI benefits from residents of Puerto Rico is to promote the increased autonomy of Puerto Rico. The existence of the Puerto Rico Oversight Management and Economic Stability Act, or PROMESA effectively limits the ability of the Puerto Rican government to be autonomous because this law allows the U.S. government to continue to control PuertoRico’s territorial budget. This U.S. law contradicts the avowed goal of giving Puerto Rico greater fiscal autonomy.

Vaello-Madero concludes that there is no “compelling government interest” in excluding residents of Puerto Rico from receiving SSI benefits. The need for SSI benefits of eligible U.S. citizens living in Puerto Rico is no less urgent than those of citizens living in the mainland or the CNMI. The exclusion of Puerto Rico residents is arbitrary and discriminatory and therefore unconstitutional.

During the oral arguments, Justice Sonia Sotomayor, who is of Puerto Rican descent, seemed sympathetic to her home territory, noting that Puerto Ricans "pay as much taxes, other combined taxes, as other states in the union."


“It’s nice to sort of cherry-pick one tax, but that’s true around the country,” Sotomayor said. “So, I don’t know how exempting out one or two taxes gets you away from seeing whether the government’s distinction is rationally based on the need of the citizens who are supposed to receive the money.”

Other justices pondered on the merits of “unequal treatment” vis-à-vis the tax contributions.

Following the U.S. government’s logic, Justice Stephen Beyer* said, “I think, that congress could exclude Wyoming, Mississippi, any state where the amount of revenue that comes to the federal government from that state divided by what they'll have to pay out in SSI is smaller than most states because that's the situation that they say justifies Puerto Rico being treated differently.”

Addressing the government’s counsel, Justice Neil Gorsuch asked: “Why? Why shouldn't we just admit the Insular Cases were incorrectly decided?”

The impact of U.S. Supreme Court’s decision, in this case, goes beyond the confines of the SSI law.

The fundamental issues, in this case, are not novel. They were pondered and decided by the Supreme Court more than 100 years ago. It will be interesting to see how the U.S. Supreme Court resolves these same issues at this point of history.

* Justice Breyer announced his retirement this month.

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