Feb. 2, 2004 – The territory could get some encouraging financial news next week when the U.S. Senate is tentatively scheduled to consider a measure to eliminate the cap for a year on the portion of federal rum excise taxes returned to the Virgin Islands.
Gov. Charles W. Turnbull announced on Monday that the U.S. Senate Finance Committee has included language in a federal highway reauthorization bill to eliminate the cap for the year 2005, allowing the Virgin Islands to receive the full $13.50 per proof gallon tax.
Advantages from the bill would be twofold. "This is an important advance in our long-standing efforts to eliminate the tax," Turnbull said. The territory would gain an additional $40 million in needed revenues over a two-year period, and the move would "set the stage for a permanent fix," he said.
The rum provision would temporarily extend the current formula whereby the territory receives $13.25 per proof gallon of rum shipped to the mainland, while the U.S. Treasury keeps 25 cents of the excise tax.
The battle to retrieve a greater share of the tax has been going on for years. Congress first imposed the tax in 1984, in response to a scheme developed by Puerto Rico to "redistill" alcohol originally distilled on the U.S. mainland in order to increase the commonwealth government's share of the federal taxes. (See "Extending V.I. rum benefit wins House OK".)
As part of that 1984 legislation , Congress shut down the "redistillation" program and set the portion of rum taxes to be returned to Puerto Rico and the Virgin Islands at $10.50. It was later raised to $11.30 and then, in 1999, to the current $13.25.
An aide to Delegate Donna Christensen said on Monday that she had not yet made an announcement concerning the pending rum tax measure.

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