As local politicians try to staunch the Virgin Islands’ financial hemorrhaging, some are looking at a potential transfusion from part of the $60 million-plus collected in taxes on products produced by HOVENSA every year.
The federal government collects tens of millions of dollars in taxes each year on V.I. petroleum and petroleum products shipped into and sold on the mainland. A rebate on a percentage of petroleum taxes, similar to what the territory receives on rum produced on St. Croix, could translate into millions of dollars annually for the V.I’s ailing treasury.
Last week, St. Thomas Sen. Donald "Ducks" Cole called on the V.I. government, Delegate to Congress Donna Christian Christensen and local civic organizations to start putting together a lobbying plan and a proposal to take to Congress.
"I believe everything should be on the table at this time," Cole said at a Rotary meeting on St. Thomas. "A return of a percentage of the gas tax will be a boost to the economy, a new revenue stream, a chance to start paying vendors, income taxes, retro pay, WAPA bills and money to provide the other needed services."
Trying to tap into the petroleum tax isn’t a new concept. In 1976, former Gov. Juan Luis’ administration sued the federal government. It contended that the taxes and customs duties on petroleum products should be placed into the V.I. Treasury.
The V.I. won in in District Court, but the federal government appealed the decision in a higher court. Meanwhile, President Jimmy Carter offered the V.I. a $30 million-a-year settlement, which, according to former Delegate to Congress Ron de Lugo, included a cost-of-living escalator clause.
However, the V.I. turned down the offer from the White House. Today, it would be bringing in tens of millions a year to the territory. Then the V.I. lost the appeal.
"I didn’t feel we should have taken it all the way through the legal system," de Lugo said. "I wanted to take it through the political system. This was a political problem, not a legal one."
De Lugo said that is still the case. But after losing the appeal, the V.I. now doesn’t have solid ground to stand on while lobbying Congress or the White House.
"We lost the case in federal court," de Lugo said. "You’re starting from zero politically. There isn’t any leverage."
The former 10-term delegate, who retired in 1995, said he agrees with current Delegate to Congress Christensen that efforts to win a percentage of the petroleum tax should be placed on the back burner.
Christensen is on record saying that she doesn’t disagree with Cole’s proposal, but that pursuing the petroleum tax now could be "fatal" to other initiatives. Rather, she says, the focus should be on recovering the full amount of excise taxes on rum, which would bring in an additional $10 million to $12 million annually.
Going after the gas tax could also jeopardize the territory’s effort to have the federal government forgive the V.I.’s $200 million FEMA Community Disaster Loan, she said. If the loan isn’t forgiven, the territory will have to start making annual payments of $25 million beginning in 2001.
Also, there is an effort underway in the White House and in Congress to provide the V.I. with a multi-year construction grant worth more than $50 million.
In her July 19 report from Washington, Christensen said that since none of the above efforts are done deals, and in part accomplish "what we would seek to do through a request to return a portion of taxes collected on gasoline, we should not run the risk of jeopardizing them by raising another controversial and difficult issue to Congress and the President at this time."
De Lugo, who said Turnbull approached him early on in the administration about the issue but hasn’t made contact since, called Christensen’s position "very wise."
"In my judgment, you put everything at risk" by going after the gas tax, he said. "I think the Delegate is absolutely correct."
