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Cruz Bay
Wednesday, September 28, 2022


I have always advocated a Virgin Islands commission to study the issue of the return of the gasoline taxes to the U.S. Virgin Islands, because it would settle once and for all exactly what revenue is available to the Virgin Islands and what strategy should be used to obtain it.
However, let me reiterate my actions thus far in working for the return of gasoline taxes to the territory.
In June of 1997, when I first approached the White House for a package of economic initiatives for the territory, the return of the gasoline taxes was one of the matters brought before the team of economic advisors assigned to us by the President. Also on the agenda was the lifting of the cap on rum excise taxes, the forgiveness of Federal emergency Management Agency disaster loans, the extension of benefits given to watch manufacturers in the islands to jewelry manufacturers, and the establishment of empowerment zones in the territory.
Our list of items was reviewed and the issues that were immediately attainable were put on a fast track to be resolved. We have begun to see the fruits of this in the passage of the watch/jewelry bill, the partial return of rum revenues earlier this year, and the current initiatives between the Turnbull administration and the White House and the Interior Department.
In speaking with White House officials and both Democratic and Republican members of the Ways and Means Committee and the Transportation Committee (both of which have jurisdiction over the issues), we have been told repeatedly that in the 1990s political climate of cutting taxes, saving Social Security and retiring the national debt, the chances of having gas tax revenues returned to the territory are slim.
But in any case, let us look at the facts.
Our research shows that there is no federal excise tax on production of gasoline in the U.S. The tax popularly referred to in V.I. political circles is an excise tax on the distribution of gasoline to bulk buyers. It is ultimately passed on as a sales tax paid by the U.S. consumer at the pump. Distributors in the U.S. pay approximately 40 cents a gallon, 18.6 cents of which goes to the federal government and the rest of which goes to the respective states (24.4 cents on diesel).
What is the difference? An excise tax is paid by companies (i.e. V.I. Rum Industries) to the federal government on products that they sell. Hess Oil pays no such tax to the federal government. The taxes are paid by distributors who buy the gasoline in bulk. Most economic experts say that the taxes are ultimately passed on to the consumers at the pump as a sales tax. The Virgin Islands government has the ability to impose its own excise tax on Hess Oil but it has traditionally given an exemption to the company in its package of incentives negotiated every 20 years or so.
The difference between these taxes was the basis for the court's rejection of the Virgin Islands claim to such monies in the '70s. The settlement offered to the territory at that time was done in the climate of the lawsuit and the politics of the time (a Democratic Congress with a more liberal view toward spending).
So what about the excise tax on the distribution of gasoline taxes to bulk buyers? Should we ask Congress to give us a rebate on these revenues?
The truth is, we already receive funding from this tax through transportation dollars to the tune of $20 million yearly. Over the next five years, we are slated to receive $98 million in these islands that we can use for various projects across the territory.
Will members of Congress willingly give us more money from this fund which is paid by their constituents? Will they be willing to give the territory more money when it will mean less for their districts? Will they be willing to give us more when we have waived our rights to impose excise taxes on Hess Oil ourselves?
Although there is a federal surplus, in the current political climate of fiscal conservatism exemplified by the "pay-as-you-go" provisions of the Federal Budget Act, tax cuts, and saving Social Security. . . it is unlikely.
Thus my argument for proceeding with other economic initiatives such as removing the cap on the rum excise monies, obtaining the forgiveness of the FEMA debt and obtaining $50 million-plus in construction grants for the territory are more readily attainable and should not be jeopardized by asking for more of the gas tax revenues at this time.
In any case, nowhere in the current surge of interest in the Legislature and from the esteemed presiding judge of the Territorial Court is there a quick fix for our current cash shortage.
We all know that amending the Organic Act is a process that will take months, if not years. Forming a commission to lobby for these taxes will not take away the painful task of cost-cutting that is before V.I. elected officials. In order for us to gain the respect of the White House and Congress, we must demonstrate that we can, indeed, tighten our belts, reduce our spending and handle our financial affairs in a competent manner.

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