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Latino Daily News

Monday May 23, 2011

U.S. Rum Tax Benefitting Puerto Rico Under Government Scrutiny with New Legislation

U.S. Senator Robert Menendez (D-NJ) has re-introduced legislation to ensure that more taxpayer money for the U.S. territories is used to invest in job creation and vital public services instead of subsidizing foreign corporations. The Investing in U.S. Territories, Not Corporations Act would cap at 15 percent the amount of money U.S. territories can use to subsidize rum producers.

Created to provide budgetary support to the territories for essential public infrastructure and services, the federal excise tax on rum sold in the U.S. is given to the treasuries of Puerto Rico and the U.S. Virgin Islands.

A deal that the United States Virgin Islands (USVI) brokered with Diageo, a British multi-national spirits company, to entice it to move production of Captain Morgan rum to St. Croix is threatening to gut the program by redirecting billions of dollars that are currently being used to fund vital public services in the territories to increase the profits of Diageo.  The deal commits 47.5 percent of cover-over revenues, totaling some $2.7 billion over 30 years.

Senator Menendez feels, unless action like this legislation proposes is taken, excessive subsidies paid out of tax revenues could siphon off billions of dollars that would otherwise go to funding for vital public services.