• The Star Staff

U.S. Dept. of Justice on Appeals Court ruling: Decision of not to extend SSI to PR

By The Star Staff

In asking the U.S. Supreme Court last week to overturn a U.S. First Circuit Court of Appeals ruling that Congress’ decision not to extend the Supplemental Security Income (SSI) program to Puerto Rico violates the equal-protection clause, the Justice Department argued that it would have significant consequences not only for Puerto Rico but for other U.S. territories.

The Appeals Court ruling may cost billions of dollars to the U.S. government, may cause an economic disruption and open up a pandora box as it could lead to challenges to laws that treat U.S. territories differently than the states for purposes of federal funding, the U.S. government said.

“The court of appeals’ decision concerns Puerto Rico, but Congress has also excluded other territories, apart from the Northern Mariana Islands, from the SSI program. One court has already held, in reliance on the court of appeals’ decision in this case, that Congress’s decision not to include Guam in the SSI program violates the Fifth Amendment,” the Justice’s appeal reads.

The U.S. First Circuit Court of Appeals in April affirmed a lower court ruling that “the categorical exclusion of otherwise eligible Puerto Rico residents from SSI is not rationally related to a legitimate government interest.”

The decision in the case of United States vs Jose Vaello involved a Social Security Income disability recipient who continued to receive the payments after he moved back to Puerto Rico from New York in 2013. The U.S. government sought to claw back the $28,081 payments he received over a three-year period after he returned to Puerto Rico arguing he was no longer entitled to the benefits after moving to the commonwealth.

In February 2019, U.S. District Court Judge Gustavo Gelpí had ruled Jose Luis Vaello Madero did not have to return the money after finding that Congress “cannot demean and brand said United States citizen while in Puerto Rico with a stigma of inferior citizenship to that of his brethren nationwide.” The United States then appealed the ruling.

SSI benefits are given to help the elderly, blind or disabled people that make less than $750 a month. The benefit is available in the 50 states, Washington DC and the Northern Mariana Islands, but Puerto Rico, Guam and the U.S. Virgin Islands are excluded. American Samoa is not eligible. Puerto Rico has a similar program to SSI, but recipients have to make $65 or less a month.

The U.S. government in its appeal to the Supreme Court said that while some provisions of the Constitution do require geographic uniformity—for instance, “all Duties, Imposts and Excises shall be uniform 11 throughout the United States,” the Equal Protection Clause simply is not among them. Indeed, the Constitution itself distinguishes between states and territories for a variety of purposes, including representation in Congress, participation in presidential elections, delegation of legislative power, appointments of officers and double jeopardy.

“Put simply, a Territory differs from a State, and the Constitution allows Congress to recognize that difference,” the U.S. government said.

Another reason for treating Puerto Rico differently is that individuals who reside in Puerto Rico generally owe no federal income tax on income derived from sources in Puerto Rico, corporations in Puerto Rico generally owe no federal corporate income tax on income connected with Puerto Rico and residents of Puerto Rico generally owe no federal estate and gift taxes on transfers of property in Puerto Rico.

The cost of including Puerto Rico in the SSI would be extremely great. An estimate prepared by actuaries at the Social Security Administration, that cost now would be between $1.8 billion and $2.4 billion per year over the next ten years, the U.S. government said.

Extending the benefit could also cause an economic disruption. “For example, labor economists have assembled empirical evidence showing that benefit programs can “depress work effort” by “discourag[ing] employment” and “slow[ing] the accumulation of work experience and skill.” They have also assembled evidence indicating that, in light of wage levels and other economic conditions in Puerto Rico, benefit payments could be “relatively more attractive to a larger percentage of [the] Puerto Rican workforce,” and that “the negative effects” on the “labor supply” could thus be “larger” in Puerto Rico than in the States,” the U.S. government said.

The Social Security Administration estimates that extending the SSI program to other territories beyond Puerto Rico would cost a further $700 million over the next ten years.

However, many of the arguments presented to the Supreme Court were dismissed by the Boston middle court. For instance, the Appeals Court justices noted that residents of Puerto Rico not only make substantial contributions to the federal treasury, but in fact have consistently made them in higher amounts than taxpayers in at least six states, as well as the territory of the Northern Mariana Islands. “From 1998 up until 2006, when Puerto Rico was hit by its present economic recession, Puerto Rico consistently contributed more than $4 billion annually in federal taxes and impositions into the national fisc,” the judges said.