Congressional Delegate Stacey Plaskett introduced legislation to increase the money the U.S. Virgin Islands and Puerto Rico receive from federal excise taxes on rum from the territories, her office said Friday.
As a primary funding source for the Government Employees’ Retirement System, the rebate, known as the rum cover-over, is vital for economic development and job creation, Plaskett’s office said in a written statement.
The bipartisan bill, cosponsored by Rep. Ron Estes (R-KS), would raise the rate from $10.50 to $13.25 until 2032. The rate had been $13.25 from 2017 to the end of 2021 as a way to help the islands recover from devastating hurricanes. The new legislation would raise the rate retroactively from 2022, Plaskett said.
“The cover-over has been a fundamental part of the tax relationship between the United States and its territories going back over a century,” Plaskett said. “These funds, which represent nearly 25 percent of the Virgin Islands Government’s annual budget, are critical for stabilizing the government employees’ pension program, supporting infrastructure projects, and attracting investments to diversify the economy beyond tourism.”
Under current law, excise tax collections on imported rum are transferred to Puerto Rico and the U.S. Virgin Islands at the rate of $13.25 per proof gallon; $10.50 per proof gallon is in permanent law, and the remaining $2.75 per proof gallon requires periodic reauthorization by Congress. This legislation would amend Section 7652 of the Internal Revenue Code of 1986, making $13.25 per proof gallon the amount covered over by law until 2032, enhancing long-term sustainable economic growth in the two U.S. territories.
Attempts to have the rate raised have long been a part of the delegate’s job. In 1999, then-Delegate Donna Christensen successfully lobbied Sen. Trent Lott and President Bill Clinton to have the rate temporarily raised from $10.50 to $13.25.
The bill came on the heels of an emergency meeting with Plaskett and a delegation of USVI legislators and GERS representatives in Washington earlier this week. Senate President Milton Potter, Sen. Novelle Francis, Sen. Marvin Blyden and Sen. Kurt Vialet, as well as GERS Administrator Angel Dawson and Chair Dwane Callwood met with Republicans and Democrats on the Ways and Means Committee. They also met with Democratic leadership in the House of Representatives and lobbyists from the rum industry, Plaskett said.
“Our collective advocacy is paramount for policies that will advance the Virgin Islands,” she said.
