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rum tax rebate

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Can anyone tell me what the rum tax rebate that was added on to the bailout bill is actually used for in the USVI? My friends in the states are really pissed that it's added on to the bill -- it's like they've gone totally anti-USVI b/c of it. All I have read is that it goes to funding $600M in government bonds for the USVI, but don't know much else. What are the bonds used for?

Topic starter Posted : October 6, 2008 7:20 pm
A Davis
Trusted Member

I think a lot of folks don't know that this does not go to special interest groups, namely rum producers. It's part of a longstanding agreement that benefits the people of the Virgin Islands and Puerto Rico. Please read our Delegate to Congress' statement:

CNN reporters corrected themselves on the air, but over the weekend, when I am sure fewer people were watching. It would be nice if more media outlets would make it clear that the governments of these territories (VI and Puerto Rico) will have much-needed infusions that will help us to better meet increased demands during these tough economic times.

Posted : October 6, 2008 7:40 pm
A Davis
Trusted Member

Just adding on:

By ANDREW O. SELSKY – 2 days ago

SAN JUAN, Puerto Rico (AP) — The U.S. economy got a US$700 billion shot in the arm Friday — and Puerto Rico and the U.S. Virgin Islands got a shot of assistance from rum.

Tucked into the unprecedented rescue package passed by Congress was a provision renewing a rum tax rebate to the U.S. Caribbean territories.

Rep. Steve LaTourette, R-Ohio called the rebate "the most egregious" of the special tax benefits tacked onto the bailout bill in the Senate. He was one of a group of House Republicans who kept their vows to oppose the bailout, partly because of the Senate add-ons.

But in a telephone interview with The Associated Press minutes before the 263-171 vote, Democratic Rep. Charles Rangel brushed off concerns about the rum measure, estimated to be worth US$192 million over 10 years. His constituents in New York include many Puerto Ricans.

"It's been in effect many years, and was not put in like bows and arrows to get a vote," said the chairman of the Ways and Means Committee, referring to an even more obscure tax break inserted for wooden arrows used by children.

Puerto Rican and U.S. Virgin Islands governments use the money to finance infrastructure and public services. The rebate — which sends back all but 25 cents of the $13.50 in federal excise taxes levied per proof gallon of rum produced in the islands — expired at the end of 2007. The bailout bill extends it through 2009 and makes it retroactive to Jan. 1.

Virgin Islands Gov. John deJongh praised the islands' "friends in the Congress who resisted the effort to delete our rum provision because it provided a good 'sound bite' for opponents of the larger bill."

Rangel compared the rum flap to a slight breeze amid a hurricane. But he said he still objects in principle to the bailout bill because the Senate had bundled in other initiatives, including other tax provisions and spending on energy and disaster aid, and "merged it into one vote."

Rangel said he had no choice but to vote "yes" on Friday to avert economic catastrophe.

"That's no way to legislate," Rangel complained to the AP. "They wait until the 11th hour and then they play chicken with us."

Frank Coleman, of the Washington-based Distilled Spirits Council, said the lobbying group received numerous calls from people who mistakenly believed rum producers, and not the island governments, would benefit directly from the provision. It is usually renewed with little controversy, he said, but "being part of the bailout took it to another level."

Posted : October 6, 2008 7:49 pm
A Davis
Trusted Member

Adding on:

Rum Tax Break Report False, Says Distilled Spirits Council of the United States

WASHINGTON, Oct. 3 /PRNewswire-USNewswire/ -- There is confusion over a provision in the current financial rescue package which benefits the rum-producing territories of Puerto Rico and the Virgin Islands. This is not a tax break for rum makers as has been reported in the press and claimed on Capitol Hill.

It is fundamentally a revenue sharing arrangement between the U.S. government and the governments of Puerto Rico and the Virgin Islands, which Congress has voted to extend repeatedly over the last 20 years. Under this provision, the federal government rebates to the governments of Puerto Rico and the Virgin Islands most of the Federal Excise Tax collected on rum imported to the United States.

"Essentially, this longstanding policy allows the governments of Puerto Rico and the Virgin Islands to keep the taxes on the rum produced there. It is not a tax break for rum companies," said Mark Gorman, Senior Vice President for the Distilled Spirits Council.

DISCUS is the trade association representing producers and marketers of distilled spirits sold in the United States.


SOURCE Distilled Spirits Council of the United States

Posted : October 6, 2008 7:53 pm
A Davis
Trusted Member

Adding on for the last time:

Bailout Plan Passes Congress
Rum Tax Cover Over Included

October 3, 2008

Contact: Monique C. Watson – (202)-226-7973

The $700 billion financial rescue package passed the U.S. House of Representatives on Friday afternoon by a 263-171 vote and with it, the rum tax cover over extension for the U.S. Virgin Islands.

“We were assured by both the Democratic and Republican leadership that our rum tax extension was safe despite attempts by some Members yesterday to remove it from the bailout package,” said Congresswoman Christensen. “The rum tax extension covers 2008 retroactively and covers through the end of 2009.” The Virgin Islands is expected to garner at least $80 million in revenues which are used to finance public infrastructure bonds.

Congresswoman Christensen worked to defend the rum cover over provisions all day Thursday after they came under extra scrutiny in the media and the blogosphere by those who believed that it was a “pork barrel” benefit to rum producers. “We made it clear to uninformed members and the media that this was not a new round of spending, but a traditional benefit to the governments of Puerto Rico and the Virgin Islands that were an important part of our economy.”

The bailout bill, H.R. 1424 was amended to ensure its passage on Friday. It included taxpayer protections, requiring a plan for full repayment; it limits CEO compensation; it institutes oversight authority and it includes help for struggling homeowners and small businesses. It also includes AMT tax relief for 25 million American families and tax incentives for renewable energy and green jobs.

Posted : October 6, 2008 8:30 pm
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