Oct. 3, 2008 — The U.S. financial industry got a $700 billion bailout Friday and the territory got an extension of its rum cover over, often called the rum tax rebate. The measure was included in the bailout bill that passed the U.S. House of Representatives Friday by a 263 to 171 vote and was signed into law by President Bush.
The rum tax measure provides a two-year extension retroactive to Jan. 1, the date the last extension expired.
"We were assured by both the Democratic and Republican leadership that our rum tax extension was safe despite attempts by some members yesterday to remove it from the bailout package," Delegate Donna M. Christensen said in a press release Friday.
The rum cover over pumps about $80 million a year into the territory's economy. That figure is expected to more than double after construction of the new Diageo distillery on St. Croix is finished in 2012.
The federal government returns to the territorial government $13.25 for each proof gallon of rum produced in the territory and sold in the United States. Rum buyers pay $13.50 in federal taxes.
Without Congressional action, the amount of rum taxes returned to the Virgin Islands 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 rum cover over inclusion in the bill didn't come without a fight. Christensen said she worked to defend the rum cover-over provisions all day Thursday after they came under scrutiny in the media by those who believed that it was a pork barrel benefit to rum producers.
"We made it clear to uninformed members and the media that this was not a new round of spending, but a traditional benefit to the governments of Puerto Rico and the Virgin Islands that were an important part of our economy," Christensen said.
The bill cleared the Senate on Wednesday. Bush signed it into law Friday shortly after the House passed it.
Gov. John P. deJongh Jr. said Friday that he was enormously gratified by the House vote.
"Congress has acted with courage to save our financial system and resisted the temptation to vote on the basis of emotion alone or a misplaced desire to 'punish' Wall Street. I am also grateful to our friends in the Congress who resisted the effort to delete our rum provision because it provided a good sound bite for opponents of the larger bill," the governor said in a press release.
DeJongh also commended Christensen for her efforts to educate her colleagues on the historical purpose and importance of the rum tax provision to the fiscal stability of the Virgin Islands government and the well-being of the Virgin Islands people.
The bailout bill included taxpayer protections, requiring a plan for full repayment. It limits chief executive officer compensation for some companies, institutes oversight authority and includes help for struggling homeowners and small businesses. It also includes tax relief for the 25 million American families who must pay the Alternative Minimum Tax and tax incentives for renewable energy and green jobs.
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