Sumaya H. Bouadi (Withers) and Neil Weare (Right to Democracy) have a new article on SSRN titled “Overruling the Insular Cases: What About Federal Taxes?” Here’s the abstract:
The Insular Cases—Supreme Court rulings from the early 1900s addressing the constitutional status of the Territories—are under fire. In 2022, Supreme Court Justice Neil Gorsuch declared “[t]hey deserve no place in our law” because they “have no foundation in the Constitution and rest instead on racial stereotypes.” Justice Sonia Sotomayor agreed, stating that the Insular Cases “were premised on beliefs both odious and wrong.” In 2024, the U.S. Justice Department established a formal policy “that the racist language and logic of the Insular Cases deserve no place in our law,” after sending a letter to Congress “condemn[ing] the racist rhetoric and reasoning of the Insular Cases” as “irreconcilable with foundational American principles of equality, justice, and democracy.” It seems only a matter of time before they are finally overruled by the U.S. Supreme Court.
While the Insular Cases have been widely condemned, legitimate questions remain over what impact overruling the Insular Cases would have on the lives of people in the Territories today. One area of particular concern many have is what revoking the Insular Cases would mean for the unique federal tax rules that currently exist in the Territories. Some go so far as to suggest that overruling the Insular Cases would trigger the immediate imposition of federal income taxes across the board in the Territories and eliminate other “favorable” tax treatment.
These concerns are misplaced. Congress has broad discretion to draw distinctions on federal taxes in the Territories largely as it sees fit—completely independent of whether the Insular Cases remain “good law.” Overruling the Insular Cases would not impact the federal tax obligations of people living in the Territories. The main reason for this is that Congress has far greater flexibility under the Constitution to establish federal tax policy than many people realize—both in the Territories and in the fifty States. Moreover, the Territories Clause of the U.S. Constitution provides an independent basis—separate and apart from the Insular Cases—for Congress to treat people in the Territories differently when it comes to questions of federal taxation and benefits.
Ultimately, the law is clear: for better or worse, Congress has broad discretion independent of the Insular Cases to regulate federal tax policy, both in the Territories and throughout the United States. Overruling the Insular Cases would not impact the federal tax obligations of those living in U.S. Territories. This reality makes it all the more certain that the Insular Cases, their racist reasoning and rhetoric, and the undemocratic colonial framework they established deserve “no place in our law” and should be overruled.
