The U.S. Virgin Islands rum cover over, responsible for some $20 million in annual revenue, was extended Tuesday night, according to Delegate to Congress Donna Christensen's office. When the U.S. House of Representatives voted Tuesday night to pass compromise legislation allowing President George Bush's tax breaks for the wealthiest to expire, but permanently extending them for most Americans, the legislation also extended the rum cover over for two more years, ensuring the territory will get those needed funds, according to Christensen's office.
The U.S House of Representatives voted 257 to 167 to pass the Senate Tax Agreement, which included language extending the Virgin Islands rum cover over from $10.50 to $13.25, Christensen said in the statement released Wednesday morning a little after midnight.
“This was a hard fought compromise and, in addition to keeping the country financially stable, I am grateful that our rum cover over was extended once more,” Christensen said. She added that Republican amendments rumored throughout the day never materialized and that the deal that was worked out between Vice President Joe Biden and Senate Minority Leader Mitch McConnell passed the House intact.
“My fellow Democrats and I were briefed by Vice President Biden on the compromise that was reached, and I have to say that he can negotiate for me at anytime!” she said. “While there are things in the deal that I don’t fully agree with, in the spirit of compromise, I believe that this agreement should be passed.”
Christensen said she was pleased at the two-year extension which retroactively raises the cover over for 2012 and extends it through 2013. She introduced legislation earlier this year with Puerto Rico Resident Commissioner Pedro Pirellis for the two-year extension to show a unified front between the two U.S. territories on the importance of rum revenues to their respective economies.
The Senate Tax Agreement being voted on in the House includes a permanent extension of existing tax cuts for individuals up to $400,000 and families up to $450,000 – substantially above the $250,000 level championed by President Barack Obama during and since the campaign.
The bill also extends Emergency Unemployment Insurance benefits for 2 million people for one year, according to Christensen's office.
The deal extends Obama’s expansions of the Child Tax Credit, Earned Income Tax Credit, and the president’s new American Opportunity Tax Credit, which helps families pay for college, for five years. These will prevent taxes from increasing by an average of $1,000 for 25 million working families and students, according to Christensen.
The agreement also extends tax relief for businesses through the end of next year. This means extending the Production Tax Credit, a key incentive for renewable energy that many Republicans had been trying to end, as well as the Research & Experimentation tax credit. In addition, the agreement extends 50 percent bonus depreciation, which Christensen's office said is a cost-effective temporary measure to support investment and growth. All of these would be extended through the end of 2013.
The deal restores the 39.6 percent rate for high-income households, as in the 1990s: The top rate would return to 39.6 percent for singles with incomes above $400,000 and married couples with incomes above $450,000. It makes the Bush tax cuts permanent for incomes up to $400,000.
Capital gains rates for high-income households return to Clinton-era levels: The capital gains rate would return to 20 percent as they were under President Bill Clinton. Counting the 3.8 percent surcharge from the Affordable Care Act, dividends and capital gains would be taxed at a rate of 23.8 percent for high-income households. These tax rates would apply to singles above $400,000 and couples above $450,000.
According to Christensen, the agreement reinstates the Clinton-era limits on high-income tax benefits – the phase-out of itemized deductions (“Pease”) and the Personal Exemption Phase-out (“PEP”), for couples with incomes over $300,000 and singles with incomes over $250,000.
It also raises the tax rate on the wealthiest estates – worth upwards of $5 million per person – from 35 percent to 40 percent. This is in contrast to Republican proposals to continue the current estate tax levels. Had no agreement been reached, the estate tax would have risen to 55 percent on estates valued at $1 million or more, so the agreement is a sharp cut in comparison to no agreement.
The agreement’s $620 billion in revenue is 85 percent of the amount raised by the Senate-passed bill, if that bill had been enacted and made permanent, according to Christensen. The agreement locks in $620 billion in high-income revenue over the next 10 years. In contrast, the bill passed by Democrats in the Senate achieved approximately $70 billion through one-year provisions; these same provisions could have raised a total of $715 billion over 10 years if Congress acted again to extend it permanently, according to Christensen. However, the Senate bill itself locked in only one year’s worth of savings so would have required additional extensions to achieve those savings.