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To: Live2Sail who wrote (160413)	10/27/2008 12:07:04 AM
From: Jim McMannis	Respond to of 306849

Wasted? Bailout bill subsidizes rum politico.com As Congress debated the historic financial rescue package on Oct. 3, the world economy was hanging in the balance. The House already had rejected Treasury Secretary Henry Paulson’s emergency $700 billion banking bailout plan. The Senate, hoping to get the House to relent, added $110 billion in “sweeteners” and sent the bill back. One of those sweeteners jumped out at Rep. Marcy Kaptur (D-Ohio). It would permit Puerto Rico and the U.S. Virgin Islands to pocket $192 million in federal excise taxes collected from rum-makers in those territories. “Madam speaker, the Senate's response to the House rejection of the Paulson plan was to add more spending. So we got tax breaks for rum,” Kaptur said from the well of the House. “You've got it right. R-U-M.” Lobbyists for Bacardi and Captain Morgan, the two most popular rum brands in America, howled in protest at the suggestion the money would go to rum-makers. The provision does not give money to Bacardi and Captain Morgan, they said. It gives it to Puerto Rico and the Virgin Islands to build up their economies in hopes of averting the need for larger financial handouts from the mainland, they argued. Once the rescue bill was signed into law, the rum provision was quickly forgotten. If it hadn’t been attached to the controversial bank bailout bill, Congress probably would have extended it with little or no dissent, as it does routinely every couple of years. “I'm sure that the members of Congress who were yelling about a tax break for rum distillers have probably voted for it as long as they've been in the Congress," said Frank Coleman, spokesman for the Distilled Spirits Council, a trade association that represents the liquor industry in Washington. But the momentary furor over the provision at a moment of high political drama focused rare attention on the 91-year-old tax provision. And when ProPublica looked closer, it found that a significant share of the $192 million will indeed go to rum-makers as marketing subsidies and production incentives. What’s more, that $192 million is just part of a larger pot of rum excise tax money Congress steers to the territories each year under what is known as the rum “cover over” program. Rum-makers get a significant chunk of the larger pot, too. Currently, their share amounts to tens of millions of dollars each year. But that could grow many-fold, because rum-makers are now playing the two U.S. territories against one another to grab a far larger share of the federal excise taxes. In 2012, Diageo, the parent company of Captain Morgan, will move its operation from Puerto Rico to the Virgin Islands in exchange for more of the excise tax money. Puerto Rico has been giving Diageo a small fraction of its excise tax revenue. The Virgin Islands will give Diageo close to half of its share. Diageo said that without that lucrative deal, it would have left the U.S. territories for a country where it could operate more cheaply, and the Virgin Islands would have ended up with nothing. This way, the company argues, it is keeping jobs in the U.S. territories. But critics say the Virgin Islands is setting a bad precedent by being so generous to the world’s largest liquor company, which is based in London and had $4.2 billion in operating profits last year. "To give the people's money away to a foreign company replete with cash and equity is mind-boggling," said Virgin Islands territorial Sen. Neville James. "There is economic development and then there's giving away the ranch. These flat giveaways of excise tax rebates create a cause for concern.” *** For decades, Congress has been giving Puerto Rico and the Virgin Islands most of the excise taxes the islands’ rum-makers pay for each proof gallon of rum they sell within the United States. Puerto Rico, which has four rum-makers, gets about $400 million a year. The Virgin Islands, which has one, gets about $80 million. The federal government keeps about $9 million. Tension between the territories surfaced in June, when Diageo and the Virgin Islands stunned Puerto Rico by announcing that the Captain Morgan brand would move from Puerto Rico to the Virgin Islands in 2012. Captain Morgan is the second-most-popular rum in the United States and its market share is rapidly increasing. Shifting production to the Virgin Islands will shift a large amount of the rum excise tax revenue there, too. That’s because the amount of money each territory gets is proportional to the amount of rum produced there and sold in the United States. 1 \| 2 \| 3 \| Next Page >>