The U.S. Senate Wednesday passed a bill extending the rum cover-over after blocking an amendment proposed by Florida Sen. George LeMieux (R) that would have radically altered the way the funds are allocated between the two territories.
The bill, HR-4213, passed 62-36, on a mostly party-line vote. Fifty-four Democrats and six Republicans voted yea, while 35 Republicans and one Democrat voted nay. The lone dissenting Democrat was Sen. Ben Nelson of Nebraska. LeMieux also voted nay.
Gov. John P. deJongh Jr. hailed passage of the tax extenders bill as a clear commitment to the successful future of the territory. The passage of HR-4213 included a continuation of the rum excise tax cover-over provision that generates revenue for the U.S. Virgin Islands based on local rum production. That revenue will be used to ensure the territory’s future economic health and modernize its rum industry, deJongh said.
“The rum cover-over program is vital to the U.S. Virgin Islands’ long-term economic development strategy,” the governor said in a statement released Wednesday evening. After thanking Majority Leader Harry Reid (D-NV) and a host of other Democratic senators, deJongh noted the bill's passage "allows us to move ahead with plans to develop our economy, generate business activity in the territory and provide public services to our hardworking residents.”
A tax of $13.50 is charged for each proof gallon of rum produced in the U.S. Virgin Islands and Puerto Rico. Under the permanent portion of the program, $10.50 of that is returned to the territory in which the rum is produced.
An additional $1.75 per proof gallon is returned under a law passed in the 1950s, but that portion must be renewed periodically by Congress. Delegate Donna Christensen has been working on the renewal since the beginning of the session.
In passing the bill, the Senate blocked Lemieux's amendment, which would have vastly benefited Puerto Rico. Currently the cover-over funds are allocated based on where the rum is produced. Under the Florida Republican’s amendment, the funds would have been allocated based on the relative population of the two territories, putting the U.S. Virgin Islands at a distinct disadvantage. Puerto Rico has a population of about 4 million compared to about 110,000 for the territory.
In a statement last week, deJongh said the amendment would have “destroyed” the economy of the U.S. Virgin Islands.
The territory “dodged the bullet,” Christensen said, when the amendment stalled Wednesday because Leieux could not work out a consent agreement to force a vote on the measure before cloture was invoked Tuesday.
“The LeMieux amendment died, and although it was endorsed by some Puerto Rico officials, our supporters in the U.S. Senate were successful in making sure that it did not move forward,” Christensen said. “Although they may try again, this attempt to derail the economic lifeblood of the Virgin Islands has failed.”
LeMieux’s proposal was just one part of a yearlong attempt by Puerto Rico to undo agreements between the government of the U.S. Virgin Islands and the Diageo and Fortune Brands corporation to develop the rum industry in the territory and ensure that it remains on St. Croix for at least 30 years.
A bill still bottled up in the House Ways and Means Committee would put a 10 percent cap on the percentage of funds that can be used as a direct incentive to the industry. If the territory attempted to exceed that limit, Puerto Rico would get all the cover-over money.
In addition to supporting the territory’s investment in building a rum industry, deJongh said he intends to use future cover-over revenue to build schools and roads, strengthen the underfunded government pension program, and finance public works programs.
"The passage of HR 4213, with no changes to the cover-over program, will help make these goals a reality," he said, adding that the cover-over program helps make up the disparity between the 50 states and the U.S. Virgin Islands, which receives less funding for federal programs.
“Because of the Senate’s continued support, the cover-over program will continue to allow us to invest in our economic future. This revenue will put our rum industry, a top-three sector in the territory, on the forefront of environmental sustainability and industrial efficiency,” said deJongh, adding, “This vote is a victory for the future of the U.S. Virgin Islands.”