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HomeNewsArchivesU.S. Senate Votes to Extend Rum-Tax Formula Two Years

U.S. Senate Votes to Extend Rum-Tax Formula Two Years

Sept. 24, 2008 — Tuesday evening the U.S. Senate approved a two-year extension of the rum-tax formula — worth an additional $40 million for the V.I. treasury — as part of a bipartisan package renewing an array of expiring tax provisions.
The rum-tax measure is retroactive to last Jan. 1, when the last congressional extension expired. It ensures the territory will continue, through the end of next year, to receive $13.25 for each proof gallon of rum produced in the Territory and sold in the United States, according to a Government House statement. Without Congressional action, the amount of rum taxes returned to the territory would be set at $10.50 per proof gallon of rum, a difference of some $20 million a year based on current production figures.
The measure had been held up more than a year as a result of a long-standing dispute between Republicans and Democrats over the issue of whether the tax "extender" provisions had to be offset with other tax increases or spending cuts under congressional budget rules, according to Government House. But with the wrinkles ironed out, the Senate passed the bill containing a grab bag of renewals for expired provisions, energy production and conservation and income tax relief by a vote of 93 to 2.
A nearly identical bill is before the U.S. House of Representatives for debate in the next few days. If it passes, a conference committee will hash out the differences between the bills, producing an identical bill for both houses to vote on, which will then go to President George W. Bush for signing.
Gov. John deJongh Jr. said he was "enormously pleased" that the Democratic and Republican leadership in the Senate were finally able to come together to pass this compromise bill.
"I am hopeful that the House leadership will see the wisdom of compromise in these unsettled times and quickly pass the Senate bill without further delay," he said.
The Senate compromise bill includes some offsets, but not enough to pay for the entire cost of the bill, which also includes a number of other popular expiring tax provisions. The House was expected to begin consideration of the bill today, but fiscal conservatives may attempt to force a vote on a pared-down, fully offset extenders bill first.
The extension of the rum-tax formula, deJongh said, was critical to his plan to grow and develop the rum industry in the Virgin Islands. The government currently receives approximately $80 million a year in federal rum excise taxes. This figure is expected to more than double when construction of the new Diageo distillery is completed in 2012.
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