Where's Your Money Going?
The federal government levies an excise tax on the sale of all liquor products, including rum. However, because of the rum cover-over program, a significant amount of tax revenue from rum sales does not end up in the U.S. Treasury. Instead, the U.S. government refunds the rum tax revenue to the local governments of Puerto Rico and the U.S. Virgin Islands, two of the largest rum producers in the world.
The policy was first enacted more than a century ago to fund infrastructure and programs benefiting the citizens of Puerto Rico and the U.S. Virgin Islands, but today, rum cover-over is used to benefit liquor companies instead of the people of Puerto Rico and the U.S. Virgin Islands.
A tremendous amount of money goes back to rum producers, which are owned by some of the largest liquor companies in the world.
With so much money going back to the rum business interests, the residents of Puerto Rico and the U.S. Virgin Islands lose out. Instead of funding the construction of schools, roads, and bridges with American tax dollars, large liquor companies are getting richer.
Though well-intentioned initially, the rum cover-over program has become a handout for large liquor companies.
Congress should take a hard look at this program and reform it to ensure that the people of Puerto Rico and the U.S. Virgin Islands get the assistance they need.