Oct. 2, 2008 — Legislation extending the return of almost all federal tax paid on Virgin Islands-produced rum produced in the territory and sold on the mainland has been included in the economic bailout bill passed by the U.S. Senate Wednesday. The bill was expected to be voted on by the U.S. House of Representatives Friday.
The measure was originally passed by the two houses last week as part of the Renewable Energy and Job Creation Act of 2008. (See Bills Returning Federal Rum Taxes to V.I. Need Work ) However, differences in the versions of the bill passed by the two houses endangered the measure.
It wasn't smooth sailing, Delegate Donna M. Christensen said in a news release issued Thursday. She said she was forced to defend the rum tax rebate, also referred to as the "rum cover-over," after stateside media and bloggers called it a pork barrel benefit for rum producers in the Virgin Islands and Puerto Rico. Puerto Rico gets a similar benefit. Word of the measure’s inclusion in the economic bailout bill even made the NBC Nightly News with Brian Williams.
When the provisions of the rum tax rebate became part of the bailout package in the Senate, Christensen said the media reported that it was an incentive to get House votes.
"We have made it clear that it is not pork barrel spending but part of the traditional benefits to the governments of Puerto Rico and the Virgin Islands," Christensen said.
Christensen, who chairs the Insular Affairs Subcommittee, sent letters to her colleagues, posted clarifications on her website and Facebook page and spoke to the Associated Press and other media explaining the history of the rum tax and its role as part of the economic development pillars of Puerto Rico and the Virgin Islands.
"We did spend a good part of the day explaining that it was not a pork barrel provision or a ‘sweetener’ for the bailout bill," Christensen said.
Christensen aide Brian Modeste could not be reached for further comment.
The bill extends the return of the rum tax to the territory for two years. The territory receives $13.25 of the $13.50 tax paid on a proof gallon of rum sold on the mainland.
According to a letter to her House colleagues, posted on Christensen's website, the territory's right to receive the rum tax rebate is covered under the Organic Act of 1954.
"Failure to extend the increase to the cover-over will have significant implications in both jurisdictions that are struggling with recession," she wrote.
Without the extension, the territory would receive only $10.50 per proof gallon. Since 1999, the U.S. Congress has granted extensions that keeps the figure at $13.25.
The territory gets about $80 million a year from the rum tax, which is expected to double when the Diageo PLC rum factory on St. Croix is completed in 2012.
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